Scam forex traders say currency moves are ‘noticeable’, casino-like

Scam forex traders say currency moves are ‘noticeable’, casino-like

By Saqib Iqbal Ahmed, Carolina Mandel and Dara Ranasinghe

NEW YORK/LONDON (Reuters) – Trading in turbulent foreign exchange markets is like being in a casino right now, according to some traders who navigate markets that have been duped as central banks and governments try to correct their economies.

Last week, sleep-deprived traders advised clients of unusual market moves: the British pound collapsed to an all-time low, Japanese monetary intervention to prop up a falling yen, and the euro deeper. Plunge under the parity of the dollar.

Above all, the great US dollar that is trading at the peak of two decades. Some see no end to the painful ups and downs.

โ€œIt really is like a casino right now,โ€ said John Doyle, vice president of dealing and trading at Monex USA, who said he takes a more hands-on approach with clients and is very careful about risks.

โ€œWe have had to be more vigilant in our internal trading policies to make sure we are not taking any undue risks,โ€ Doyle said. Discipline was the key.

German Bank The Currency Volatility Index (ETR ๐Ÿ™‚ – the historical volatility index for the G7’s major currencies – jumped to a two-and-a-half year high of 13.55 on Monday.

The British pound has fallen about 5% against the dollar over the past two sessions, its worst two-session decline since March 2020, drawing comparisons to more volatile emerging market currencies. The yen is still near a 24-year low against the dollar, despite the Japanese monetary authorities’ intervention last week in the foreign exchange markets to boost the volatile currency for the first time since 1998. While the pound and the yen performed very weak against the dollar, it did not deliver a rally The meteoric dollar is any major currency. Each of the G10 currencies has fallen against the dollar this year, with an average drop of about 16%.

โ€œIt was a hectic few days for sure, and sleep was sorely lacking,โ€ said Michael Brown, head of market intelligence at Caxton Payments in London. “I would blame sterling rather than my coffee habit, but going to bed at 11:30 and getting up around 3:30 on the pound (sterling rate) hitting record lows certainly wasn’t very fun.”

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The movements have surprised currency traders and investors for a long time.

“This depth was not expected,” said Akshay Kamboj, chief investment officer at Crawford Ventures, a currency-trading hedge fund, while anticipating a deep correction in sterling.

โ€œOur team is working around the clock from several global locations,โ€ Camboge said, adding that he is not trading in sterling because the direction of the pound now depends entirely on the BoE’s reaction.

Volatility is here to stay

The volatility is unlikely to stop.

โ€œIt appears that the basis is still there for more uncontrolled moves,โ€ said Biban Ray, head of North American FX strategy at CIBC Capital Markets, adding that the driving force would be the strength of the dollar which depends on how tight the US Federal Reserve is. in raising rates.

The US dollar was dominated by higher US interest rates, a relatively strong US economy and haven demand as global financial markets became more turbulent this year.

This has exacerbated problems around the world.

With the yen weighed down by the ever-widening gap between US and Japanese government debt yields, the euro was weighed down by concerns about the energy crisis and its impact on the economy, and the pound was criticized for fears that the new government’s economic plan would be stretched. British finances to the extreme, dollar bulls were quick to press their interest.

While volatility is no stranger to forex traders, the confluence of different risks makes this moment memorable.

In contrast to March 2020, the last period of heightened volatility, when policy makers were united and had largely similar responses to the pandemic, traders now face central banks reacting in different ways as they deal with high inflation and a weak currency.

โ€œIn earlier times this was a macroeconomic story, but this is very much a central bank story where everyone is battling to raise interest rates,โ€ said Chris Huddleston, CEO of FXD Capital, who has been a former FX and bond trader for the past 20 years. . Years.

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Meanwhile, the dollar’s continued strength bodes well for global financial market analysts in Morgan Stanley (NYSE ๐Ÿ™‚ said in a note on Monday.

Analysts said, “This dollar’s strength has historically led to some kind of financial/economic crisis…If there was a time to look for something that could be broken, that would be the case.”

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