Comments on: Forex Inverse Indicator

By: Tobias Taylor

Tobias Taylor — Wed, 04 Nov 2009 22:09:54 +0000

In my view “speculative” anything (read based on conjecture or incomplete facts or information) carries risk that by its very nature that the participant is either not informed or accepts there is a parameter of risk in what they are doing. If one is partaking in accepted and understood risk, then go ahead. If one is uninformed and unsure, speculation in currencies is not advised. I have heard a fund manager refer to predicting foreign exchange is like getting a monkey to flick a coin.

Any industry involved in foreign transitions is void of basic planning principles if they do not address this. Most (if not all) major company’s hedge to some level to my knowledge. It may not be 100%, but the risk parameters is understood and a calculated risk (read not speculative) decision is made.

If we want to be in a fee market and a global economy, then variation of our currency is central to this. As long as we remain in a small economy with our own currency, this will vary in value and as Rod rightly states, it remains a Boutique asset on foreign portfolio’s. The only sure thing about the NZD is volatility.

Personal speculation does not affect our currency (read no levy), but major fund managers overseas do. We can’t regulate or levy them or then the “risk premium” of our currency is voided and therefore this stifles foreign investment.

My answer is Hedge to a plan and seek advice.

By: Murray Painter

Murray Painter — Tue, 03 Nov 2009 03:20:09 +0000

Not too keen on a levy – it would become too hard for Banks to know what was speculative and what was a “real” exposure. My advice to clients as the dollar sit at between 70 and 72 is to cover forward at least 60% or at most 80% of budgeted 2010 sales (particularly seasonal products). This is if the product based on best kowledge returns shows an acceptable return at that level.The leeway can be used for not meeting budget or a small speculation. We haven’t seen it anywhere near 70 us cents for some time.

By: Rod Drury

Rod Drury — Sun, 01 Nov 2009 23:56:37 +0000

I was at a Forex session a few weeks ago with Bill and he got hammered pretty hard.

The NZ dollar is a boutique currency that gets traded heavily. I heard 250 times more than our normal trading would require.

One idea that made sense to me was a (say 1%) levy on FX transactions that were obviously just for speculation – like trades that are reversed a few days later. Not sure if that would work in practice. Any other thoughts?