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Showing results for tags 'currency'.
Found 77 results
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While Currency Certificate establish currency values at a fixed rate, the holder is still vulnerable to external shocks in the forex market, as negative price fluctuations will devalue the worth of the note.
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In a carry trade, investors will borrow in a currency with a low interest rate in order to buy a currency with a higher interest rate. The investor will profit from the difference in these rates and since these profits accumulate over time, carry trades are generally long term positions.
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Currency Binaries are relatively new in the financial markets and because of this, only the most liquid pairs can be traded in this manner. These trades use directional forecasting, as traders will profit from the direction of an exchange rate rather than the targeting of specific price levels.
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The Euro is an example of a currency basket and the aim of this type of approach to currency values is meant to limit extreme volatility that can be seen in the various currencies of the region.
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Currency Arbitrage is relatively rare in the modern trading age, as computer trading has mostly eliminated the ability to simultaneously trade currencies with different brokers at advantageous prices.
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Currency Appreciation can occur for a number of reasons, such as an increase in interest rates, inflation levels, or economic prospects.This is essentially what occurs when buyers are positive on the prospects of a currency.
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In general, each country has its own means of monetary transactions, and this is referred to as the national currency. There are exceptions to this, such as the Euro, where more than one country adopts the same monetary unit.
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A Crawling Peg is generally seen when a national government understands that the currency cannot remain fixed but at the same time there is no desire to allow the currency to trade freely on the open markets.
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Counter currencies are generally seen as the more liquid currency in a given forex pair. This can be seen in many examples, such as the GBP/USD or AUD/JPY and the counter currency provides a measure for the value of the first currency listed. For example, in the EUR/USD we can see how number of Euros it takes to purchase 1 US Dollar.
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One of the things that separates the forex markets from those where other asset types are traded is the fact that currencies are priced in pairs. Essentially, what this means is that we are never buying or selling a currency by itself. Instead, currency performance can only be viewed in relative terms and this can have drastic on the type of trades that should be placed and the various strategies that should be implemented. If this didn't complicate things enough on its own, another factor that traders must understand is that some currencies are highly correlated with some of its counterparts and inversely correlated with others. But while it might seem to be a daunting task to research and memorize the ways various currencies align with each other, currency correlations can provide traders with potential trading opportunities and tactics for managing your total risk exposure at any given moment. Understanding Correlation Comprehending the interdependence that is seen in currency pairs is easier in some cases than it is in others. For example, when dealing with the EUR/JPY we would expect there to be some similarities to others, such as the EUR/USD and the USD/JPY. A trading session particularly strong buying activity in the Euro would likely send the EUR/JPY higher but if the same trading period saw the EUR/USD trading lower, we would know that the US Dollar was the strongest of the three currencies that session, with an inevitable run higher in the USD/JPY. More specifically, correlation can be measured using the “correlation coefficient”, which ranges from +1 (highly correlated) to 0 (unrelated or random) to -1 (inversely correlated). Currencies with a coefficient of +1 would essentially move in lock-step with each other. Currencies with a coefficient of 0 would have no decipherable relationship with each other. Currencies with a coefficient of -1 would show price patterns that are mirror images of each other. Of course, most currencies will not fall exactly into one of these categories and instead will fall into some interval degree of these three coefficients. Correlation Tables Many currency brokers offer currency tables that display the correlation coefficients of the most commonly traded pairs. These are updated regularly, so traders will always have the most up to date information. Below is the currency table that is offered by OANDA, separated by regular time intervals: The table above shows the relationships between the EUR/USD forex pair and its commonly-traded counterparts (along with silver and gold). Relative to the EUR/USD, the EUR/JPY has a 1-week correlation coefficient of 0.81, while the USD/JPY has a 1-week correlation coefficient of 0.57. To better understand these coefficients, the following descriptions are given: 0.0 to 0.2 Very weak to negligible correlation 0.2 to 0.4 Weak, low correlation (not significant) 0.4 to 0.7 Moderate correlation 0.7 to 0.9 Strong, high correlation 0.9 to 1.0 Very strong correlation From this, we can see that the 1-week correlation between the EUR/USD and the EUR/JPY is “strong,” while the 1-week correlation between the EUR/USD and the USD/JPY is “moderate.” The EUR/USD and the EUR/JPY will move in the same direction 81%, while the EUR/USD and the USD/JPY will move in the same direction 57% of the time. These numbers, of course, are constantly changing depending on the various market conditions currently in place. In this case, the longer term 1-year correlation became stronger in the EUR/USD – EUR/JPY, while it weakened in the EUR/USD – USD JPY. Interestingly, looking at the table above, the EUR/USD and the USD/CHF had a perfect negative correlation of -1 during the latest 1-week to 3-month periods. With this, we can see that these pairs moved in opposing directions 100% of the time. In the next article, we will look at ways this information can be used to construct trading plans.
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The Copey slang term comes from the largest city in Denmark, Copenhagen. The currency is also used in Greenland and is generally quoted against the US Dollar when traded by retail brokers.
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Commodity Pairs include forex pairs like the AUD/USD, the USD/CAD, and the USD/NZD. Since the economies of these countries are highly dependent on exports, they are given this categorization.
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Commodity Block Currencies, such as the Australian, New Zealand and Canadian Dollars are heavily correlated with the prices of oil and metals, and make forex users use these currencies as a proxy for entering into these commodities markets.
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The Chinese Yuan (CNY)is a rare item in the forex markets, in that it is not freely traded by market investors. Instead, the value of the currency is determined by the government in a floating exchange rate.
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The CHF in the forex markets tends to fall into the “safe haven” category along with the US Dollar and the Japanese Yen. Because of this, the CHF tends to strengthen during times of market instability and weaken during times of growth.
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The Canadian Dollar, sometimes abbreviated as the CAD or given the slang term the Loonie, is generally lumped together within the commodity currency category, as the country is relatively rich in its metals and oil exports.
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The Botswana Pula is the official currency of the Botswana, given value by the nation’s central bank. The Botswana Pula can be broken down into 100 thebe, and is currently pegged to theSouth African Rand. Traders investing in the BWP currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources. Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The Bhutanese Ngultrum is the official currency of the Bhutan, given value by the nation’s central bank. The Bhutanese Ngultrum can be broken down into 100 chhertum, and is currently pegged to the Indian Rupee. Traders investing in the BTN currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources. Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The Bahamian Dollar is the official currency of the Bahamas, given value by the nation’s central bank. The Dollar can be broken down into 100 cents, and can be symbolized as B$. Traders investing in the BSD currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources. Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The Brazilian Real is the official currency of Brazil, given value by the nation’s central bank. The Real can be broken down into 100 centavos and can be symbolized as R$. Traders investing in the BRL currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources. Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The British Pound is the official currency of Great Britain, given value by the nation’s central bank.The Pound can be broken down into Pence, which is how the nation's stock prices are quoted. Traders investing in the GBP currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources.
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The Britcoin was created as a means for lowering trading costs, and with software considerations that expand and contract the available supply of the currency that is available to open markets, inflationary pressures are kept to a minimum.
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The Brazilian Real is the official currency of Brazil, given value by the nation’s central bank. The Real can be broken down into 100 centavos and can be symbolized as R$.Traders investing in the BRL currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources.Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The Bolivian Boliviano is the official currency of Bolivia, given value by the nation’s central bank.The Boliviano can be broken down into 100 centavos. Traders investing in the BOB currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources. Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
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The Brunei Dollar is the official currency of Brunei, given value by the nation’s central bank. The Dollar can be broken down into 100 sen, and can be symbolized as B$. Traders investing in the BND currency hold an optimistic view of the country’s macro economic fundamentals and the value and allocation of the countries natural resources.Price levels are heavily influenced by inflation rates, and the low liquidity levels of this currency make it unavailable in many regions.
