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2008 instability in the FX markets

Posted by Adrian on January 3, 2008

I mentioned the problems with higher yield currencies going into 2008 in 2007 under the World Crisis Scenarios for the 21st centuray – Worldwide economic depression update 8, quoted:

“The rate cutting policy will stay in place, only to signify the destruction of the US dollar, which in turn will cause major instability in all the currency markets – as globally the value of currencies, even the high yield currencies such as the EUR and CAD, NZD and AUD have shown volatility and risk from the problematic credit markets. Currently there is no real ‘flight to quality’ in currency markets as far as yields. As ‘carry traders’ have shunned risk in even the higher yield currencies. So all currencies are looking unstable.”

Bloomberg has just posted an article in regards to the problems in the FX market and volatility with the higher yeilding currencies, going into 2008, from Bloomberg

“The question is whether we’re not already in an emerging market bubble,” said John Taylor, chairman of FX Concepts Inc., a New York firm that manages about $12 billion in currencies. “What make these bubbles continue is the banks lending money and if they can’t lend money it’s over.”

FX Concepts has cut its “exposure to all of the high- yielders,” including Turkey, South Africa, Brazil, New Zealand, Iceland, Australia and currencies of Eastern European nations such as Hungary, he said.”


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