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The forex or Foreign Exchange is a financial market place where you speculate on changes in exchange rates of foreign currencies such as the euro, the dollar or Yen.

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FOREX TRADING

Canada’s currency dropped after the country’s biggest phone company, BCE Inc., announced that the $42.4 billion takeover was not going to close on December 11 as originally planned, causing the company’s stock to also weaken 34 percent. Said Richard Briggs, the vice president of MF Global Canada & Co., a unit of MF Global Ltd., “The Bell deal is disruptive. When a leading stock drops more than 30 percent that affects your currency.” The Canadian dollar weakened 1.3 percent from $1.2248 to $1.2414. It traded at $1.2303 and right now it buys 81.29 American cents.

This is the sixth straight month of decline for the Canadian dollar, the longest losing streak the currency has suffered in 15 years. Commodity prices, such as crude oil, also plummeted, contributing to the currency’s decline as the country relies on raw materials for close to a third of its export revenue. BCE is supposed to be bought out by Providence Equity Partners Inc., Madison Dearborn Partners LLC with banks Citigroup Inc. and Royal Bank of Scotland Group Plc providing financing. According to a spoke person from KMPG, BCE would have to be declared insolvent if they go through with the deal under the current terms with the market conditions being what they are.

“The Canadian dollar definitely started slipping as the news broke,” said Shaun Osborne, chief currency strategist at TD Securities Inc. in Toronto. “[There is] speculation that Canadian dollar buying related to the deal may not occur or may have to be reversed.” KPMG will have to provide BCE with a ‘favorable opinion’ by the December 11th date or else the transaction probably won’t go forward. BCE will also have to meet solvency requirements in order for the deal to be closed according to the current terms of the agreement.

The Canadian dollar – also known as the loonie due to the aquatic bird on the country’s one dollar coin – stretched its decline after a government report released last month showed that orders for American durable goods fell more than twice as much as what was forecasted. Said Jack Spitz, the managing director of foreign exchange at the National Bank of Canada in Toronto, “The potential for a significant move higher in the U.S. dollar versus the Canadian dollar is the dominant bias.” His statement was based on the BCE news and “position squaring” before tomorrow’s U.S Thanksgiving holiday. ?

INFOS

GREENBACK’S DECLINE PROMPTS TALK OF CENTRAL BANK RESERVE DIVERSIFICATION AND ENDING PEGS TO DOLLAR
CORPORATE FINANCING FOCUS

The shifting sands in the foreign exchange market in 2007 undermined the dollar to the extent that China openly weighed what its state media refer to as the “nuclear option” of dropping its vast holdings of US securities if Washington were to impose trade sanctions to force a quicker revaluation of the yuan. A weak dollar is not in the best interests of US creditors, who will be paid back in cheaper greenbacks.

Meanwhile, Jassem Al-Mannai, chairman of the Arab Monetary Fund, based in Abu Dhabi, UAE, recommended that members of the Gulf Cooperation Council end their currency pegs to the dollar to give themselves more flexibility to combat rising inflation. He suggested that the GCC countries peg their currencies to a basket of currencies, including the euro, the British pound and the Japanese yen, or shift to a managed float.

The GCC declined to follow Al-Mannai’s advice at its summit meeting in Doha, Qatar, in December, with Saudi Arabia adamant about maintaining the current system. The dollar’s role as the world’s leading reserve currency, however, is looking less secure.

“Continued talk of repegging and revaluations is a reminder of the global impact of the decline in the value of the dollar, causing central banks and sovereign funds to rethink their positioning regarding reserve accumulation, currency regimes and oil pricing,” says Ashraf Laidi, chief foreign exchange analyst at New York-based CMC Markets US. “Such comments from China have been a veiled counter threat to the growing protectionist rhetoric by Democratic presidential candidates and the US Congress calling for restrictive legislation against China in the event that Beijing didn’t revalue its currency,” he says.

FOREX AND DOLLARS$$$$$

Dollar opens lower as commodities fall

12-November-08 by AAP

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The Australian dollar has opened lower, in line with weak equity markets and falling commodity prices overnight.

At 0700 AEDT, the Australian dollar was trading at $US0.6583/88, down 1.31 US cents, or 1.95 per cent, from yesterday's close of $US0.6715/18.

During the overnight session, the unit traded between a low of $US0.6479 and a high of $US0.6722.

The Australian dollar briefly slipped below $US0.6500 - the bottom of its recent trading range - overnight as US equity markets slumped on weak company results and further concerns about embattled car maker General Motors (GM).

GM shares fell a further 15 per cent to a 65-year low after the company said it would lay off a further 1900 workers and speculation it could run out of cash by the end of the year.

Also hurting the Australian dollar were lower commodity prices - the front-month crude oil contract dropped below $US59 a barrel for the first time since March 2007 during trade on the New York Mercantile Exchange.

The price of gold, copper and silver also fell.

ANZ senior dealer Alex Sinton said the local currency was taking direction from the performance of US equity markets.

"Like the Kiwi and the Dow, the two are trading fairly closely at the moment," Mr Sinton said from Auckland.

The Australian dollar picked up 1.2 US cents between 0530 AEDT and 0630 AEDT to reach $US0.6644, but the rally quickly faded, with the unit dropping back below $US0.6600.

The Australian Bureau of Statistics publishes the labour price index for the September quarter at 1130 AEDT.

The Westpac-Melbourne Institute Index of Consumer Sentiment for November also will be released today.

In Canberra, Treasury secretary Ken Henry addresses the National Press Club at 1230 AEDT.

Mr Sinton said the Australian dollar would be under pressure today if Asian equity markets followed a weak finish on Wall Street.

"It still looks vulnerable on the down side," Mr Sinton said.

"If Asia is fairly risk averse on things, and the way equity markets have performed overnight there's no reason to believe they won't be, another test of the downside is pretty much sure to occur."

At 0900 AEDT, the Reserve Bank of Australia's trade weighted index (TWI) was at 54.4, down from yesterday's close of 55.4.

NEPAL AND FOREX

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Foreign Currency Trading

UPDATE: On May 22, 2008, the Congress passed H.R. 6124, the Food, Conservation, and Energy Act of 2008 (also known as “the Farm Bill”) which contains several amendments to the Commodity Exchange Act (“CEA”). In particular, Title XIII of the Farm Bill (1) clarifies that the CFTC’s anti-fraud authority applies to certain retail off-exchange foreign currency transactions, (2) creates a new registration category for retail foreign exchange dealers, (3) requires registration for those who solicit orders, exercise discretionary trading authority and operate pools with respect to retail off-exchange foreign currency transactions, and (4) imposes minimum capital requirements for futures commission merchants and retail foreign exchange dealers that act as counterparties to such transactions. Parts of the legislation, particularly those confirming the Commission’s anti-fraud authority, were effective upon passage. Other parts of the legislation, such as those requiring the registration of parties engaged in these transactions and minimum capital requirements, will only be effective upon the Commission’s issuance of final regulations. Any such changes to the information below will be accomplished through notice and comment rulemaking and will be made available in the Federal Register section of CFTC.gov.

AN OVRVIEW

An overview of the Forex market The Forex market is a non-stop cash market where currencies of nations are traded, typically via brokers. Foreign currencies are constantly and simultaneously bought and sold across local and global markets and traders' investments increase or decrease in value based upon currency movements. Foreign exchange market conditions can change at any time in response to real-time events.

The main enticements of currency dealing to private investors and attractions for short-term Forex trading are:

• 24-hour trading, 5 days a week with non-stop access to global Forex dealers.
• An enormous liquid market making it easy to trade most currencies.
• Volatile markets offering profit opportunities.
• Standard instruments for controlling risk exposure.
• The ability to profit in rising or falling markets.
• Leveraged trading with low margin requirements.
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INSURANCE

Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium. An insurer is a company selling the insurance. The insurance rate is a factor used to determine the amount, called the premium, to be charged for a certain amount of insurance coverage. Risk management, the practice of appraising and controlling risk, has evolved as a discrete field of study and practice.




Principles of insurance

1. A large number of homogeneous exposure units. The vast majority of insurance policies are provided for individual members of very large classes. Automobile insurance, for example, covered about 175 million automobiles in the United States in 2004.[2] The existence of a large number of homogeneous exposure units allows insurers to benefit from the so-called “law of large numbers,” which in effect states that as the number of exposure units increases, the actual results are increasingly likely to become close to expected results. There are exceptions to this criterion. Lloyd's of London is famous for insuring the life or health of actors, actresses and sports figures. Satellite Launch insurance covers events that are infrequent. Large commercial property policies may insure exceptional properties for which there are no ‘homogeneous’ exposure units. Despite failing on this criterion, many exposures like these are generally considered to be insurable.
2. Definite Loss. The event that gives rise to the loss that is subject to insurance should, at least in principle, take place at a known time, in a known place, and from a known cause. The classic example is death of an insured person on a life insurance policy. Fire, automobile accidents, and worker injuries may all easily meet this criterion. Other types of losses may only be definite in theory. Occupational disease, for instance, may involve prolonged exposure to injurious conditions where no specific time, place or cause is identifiable. Ideally, the time, place and cause of a loss should be clear enough that a reasonable person, with sufficient information, could objectively verify all three elements.
3. Accidental Loss. The event that constitutes the trigger of a claim should be fortuitous, or at least outside the control of the beneficiary of the insurance. The loss should be ‘pure,’ in the sense that it results from an event for which there is only the opportunity for cost. Events that contain speculative elements, such as ordinary business risks, are generally not considered insurable.
4. Large Loss. The size of the loss must be meaningful from the perspective of the insured. Insurance premiums need to cover both the expected cost of losses, plus the cost of issuing and administering the policy, adjusting losses, and supplying the capital needed to reasonably assure that the insurer will be able to pay claims. For small losses these latter costs may be several times the size of the expected cost of losses. There is little point in paying such costs unless the protection offered has real value to a buyer.
5. Affordable Premium. If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance. (See the U.S. Financial Accounting Standards Board standard number 113)
6. Calculable Loss. There are two elements that must be at least estimable, if not formally calculable: the probability of loss, and the attendant cost. Probability of loss is generally an empirical exercise, while cost has more to do with the ability of a reasonable person in possession of a copy of the insurance policy and a proof of loss associated with a claim presented under that policy to make a reasonably definite and objective evaluation of the amount of the loss recoverable as a result of the claim.
7. Limited risk of catastrophically large losses. The essential risk is often aggregation. If the same event can cause losses to numerous policyholders of the same insurer, the ability of that insurer to issue policies becomes constrained, not by factors surrounding the individual characteristics of a given policyholder, but by the factors surrounding the sum of all policyholders so exposed. Typically, insurers prefer to limit their exposure to a loss from a single event to some small portion of their capital base, on the order of 5 percent. Where the loss can be aggregated, or an individual policy could produce exceptionally large claims, the capital constraint will restrict an insurer's appetite for additional policyholders. The classic example is earthquake insurance, where the ability of an underwriter to issue a new policy depends on the number and size of the policies that it has already underwritten. Wind insurance in hurricane zones, particularly along coast lines, is another example of this phenomenon. In extreme cases, the aggregation can affect the entire industry, since the combined capital of insurers and reinsurers can be small compared to the needs of potential policyholders in areas exposed to aggregation risk. In commercial fire insurance it is possible to find single properties whose total exposed value is well in excess of any individual insurer’s capital constraint. Such properties are generally shared among several insurers, or are insured by a single insurer who syndicates the risk into the reinsurance market.

Indemnification


The technical definition of "indemnity" means to make whole again. There are two types of insurance contracts; 1) an "indemnity" policy and 2) a "pay on behalf" or "on behalf of"[3] policy. The difference is significant on paper, but rarely material in practice.

An "indemnity" policy will never pay claims until the insured has paid out of pocket to some third party; for example, a visitor to your home slips on a floor that you left wet and sues you for $10,000 and wins. Under an "indemnity" policy the homeowner would have to come up with the $10,000 to pay for the visitor's fall and then would be "indemnified" by the insurance carrier for the out of pocket costs (the $10,000)[4].

Under the same situation, a "pay on behalf" policy, the insurance carrier would pay the claim and the insured (the homeowner) would not be out of pocket for anything. Most modern liability insurance is written on the basis of "pay on behalf" language[5].

An entity seeking to transfer risk (an individual, corporation, or association of any type, etc.) becomes the 'insured' party once risk is assumed by an 'insurer', the insuring party, by means of a contract, called an insurance 'policy'. Generally, an insurance contract includes, at a minimum, the following elements: the parties (the insurer, the insured, the beneficiaries), the premium, the period of coverage, the particular loss event covered, the amount of coverage (i.e., the amount to be paid to the insured or beneficiary in the event of a loss), and exclusions (events not covered). An insured is thus said to be "indemnified" against the loss events covered in the policy.

Forex Notes

Forex Notes

By Lite Review on September 15th, 2008

Foreign exchange or most common called Forex now become very popular in the world. Many people have joined this kind of market to get higher income by trading the currency. Inside this market actually will be many tricky conditions that may be to complicated and difficult to understand and especially for newbie. Gathering the information also can be very difficult after you join this market if you don’t know the trick. For that reason, for you new players in this market should have good ability and deeper understanding before you join. Money can make money, yes this is can happen in Forex. You can buy money and sell it again with your own price.

You can gain information about this Forex in many places actually. For instance, you can go to fabforex.com. In this website you are able to read and learn information about Forex. You can get more information that you can call as Forex notes. Those Forex notes will be very useful for you before you join the real Forex. You can read article about real estate and correlation about Forex. And may be you wishing to read the impact of Forex to your business. All Forex notes are available for you to be your best information. In this market, information will be very important. If you missed any single information you can loose and bankrupt.

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FOREX

Today's Forex Strategy

Late US equity rally sparks comeback for JPY crosses, sees USD easing. Credit spreads show little relief in risk aversion so far, however.

Lehman CDS settlement coming back to haunt markets? University of Michigan to show double-dip in US confidence?

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Forex trading examples

Example 1

An investor has a margin deposit with Saxo Bank of USD 100,000.

The investor expects the US dollar to rise against the Swiss franc and therefore decides to buy USD 2,000,000 - 2% of his maximum possible exposure at a 1% margin Forex gearing.

The Saxo Bank dealer quotes him 1.5515-20. The investor buys USD at 1.5520.

Day 1: Buy USD 2,000,000 vs. CHF 1.5520 = Sell CHF 3,104,000.

Four days later, the dollar has actually risen to CHF 1.5745 and the investor decides to take his profit.

Upon his request, the Saxo Bank dealer quotes him 1.5745-50. The investor sells at 1.5745.

Day 5: Sell USD 2,000,000 vs. CHF 1.5745 = Buy CHF 3,149,000.

As the dollar side of the transaction involves a credit and a debit of USD 2,000,000, the investor's USD account will show no change. The CHF account will show a debit of CHF 3,104,000 and a credit of CHF 3,149,000. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the profit calculation.

This results in a profit of CHF 45,000 = approx. USD 28,600 = 28.6% profit on the deposit of USD 100,000.

---

Example 2:

The investor follows the cross rate between the EUR and the Japanese yen. He believes that this market is headed for a fall. As he is not quite confident of this trade, he uses less of the leverage available on his deposit. He chooses to ask the dealer for a quote in EUR 1,000,000. This requires a margin of EUR 1,000,000 x 5% = EUR 10,000 = approx. USD 52,500 (EUR /USD 1.05).

The dealer quotes 112.05-10. The investor sells EUR at 112.05.

Day 1: Sell EUR 1,000,000 vs. JPY 112.05 = Buy JPY 112,050,000.

He protects his position with a stop-loss order to buy back the EUR at 112.60. Two days later, this stop is triggered as the EUR o strengthens short term in spite of the investor's expectations.

Day 3: Buy EUR 1,000,000 vs. JPY 112.60 = Sell JPY 112,600,000.

The EUR side involves a credit and a debit of EUR 1,000,000. Therefore, the EUR account shows no change. The JPY account is credited JPY 112.05m and debited JPY 112.6m for a loss of JPY 0.55m. Due to the simplicity of the example and the short time horizon of the trade, we have disregarded the interest rate swap that would marginally alter the loss calculation.

This results in a loss of JPY 0.55m = approx. USD 5,300 (USD/JPY 105) = 5.3% loss on the original deposit of USD 100,000.

---

Example 3

The investor believes the Canadian dollar will strengthen against the US dollar. It is a long term view, so he takes a small position to allow for wider swings in the rate:

He asks Saxo Bank for a quote in USD 1,000,000 against the Canadian dollar. The dealer quotes 1.5390-95 and the investor sells USD at 1.5390. Selling USD is the equivalent of buying the Canadian dollar.

Day 1: Sell USD 1,000,000 vs. CAD 1.5390. He swaps the position out for two months receiving a forward rate of CAD 1.5357 = Buy CAD 1,535,700 for Day 61 due to the interest rate differential.

After a month, the desired move has occurred. The investor buys back the US dollars at 1.4880. He has to swap the position forward for a month to match the original sale. The forward rate is agreed at 1.4865.

Day 31: Buy USD 1,000,000 vs. CAD 1.4865 = Sell CAD 1,486,500 for Day 61.

Day 61: The two trades are settled and the trades go off the books. The profit secured on Day 31 can be used for margin purposes before Day 61.

The USD account receives a credit and debit of USD 1,000,000 and shows no change on the account. The CAD account is credited CAD 1,535,700 and debited CAD 1,486,500 for a profit of CAD 49,200 = approx. USD 33,100 = profit of 33.1% on the original deposit of USD 100,000.

Today's forex stradegy

The Bank of Japan was apparently trying to send some kind of message to markets overnight by only cutting 20 bps rather than moving in the usual and expected 25 bp increment. One can only imagine that they are trying to leave room to be able to cut 10 or 15 bps at a time, but they have so little yield left with which to work that the entire exercise is rather silly. In any case, the JPY hardly budged and its strengthening again late in the Asian session on nosediving equities suggests that the recent rally sequence in JPY crosses was mostly a short squeeze (this may be the case across markets really, combined with the equity/bond rebalancing we discussed previously). Still, one wonders whether we will be able to do much more than go back and test recent lows in some of these JPY crosses as the BoJ will undoubtedly be lurking the next time the action heats up. Still plenty of room on the downside between here and there.

UK confidence was out overnight at the lowest levels since the oil crisis of 1974. And yet GBP has remained relatively bid in some of the crosses - especially vs. the Euro. One focus for the Euro of late has been its vulnerability relative to the turmoil in CEE currencies and it was notable that as these turned sharply south yesterday, so did EUR. Also weighing on the Euro are the divergent yields on various countries in the EU, what some have called the PIGS spreads (The yield on paper from Portugal, Italy, Greece, Spain vs. that of German benchmarks.) Still, with the JPY and USD moving stronger again, GBP is likely to stay on a weak footing against these currencies. With things looking so dire on the sceptered isle, many are talking up the possibility of the BoE moving by 100 bps next week.

Up today we have the final regional US manufacturing survey with the Chicago PMI. The other regional surveys have been awful this month and could set up the worst ISM number on Monday since the early 1980's. The trends are all pointing to a truly ugly Q4 GDP picture for the USA: First, the strong export market was propping up US growth numbers previously, but the financial and economic implosion unfolding in EM and elsewhere have put an end to this phenomenon. So the slightly better than expected Q3 growth numbers still contained a bit of residual strength from the export sector that will not be there in Q4. Also, the Q3 growth numbers showed a sharp deceleration in consumer spending that is clearly deepening into Q4 and the combination will prove toxic for Q4 growth data. Clearly, none of this spells ill so far for the US dollar, where its strength related mostly to the global deleveraging issue - the more mayhem, the more the greenback strengthens, in other words. We're also very curious to see the ISM non-manufacturing data for October next Wednesday as the resilient September number simply defied belief.

The EuroZone picture looks far from rosy as well. Just this morning, German retail sales for September look very weak and we have to consider that unemployment numbers in the less flexible European labor market have not even begun to tick higher in some places while they've already risen by a third in the USA. It's hard to believe that the October unemployment rate for Germany, for example, ticked down to a new low since the integration of East Germany began in the early 1990's - this in an economy that is crash landing....

Liquidity is absolutely atrocious and one should adjust leverage accordingly. At one point this morning in the late Asian session, GBPUSD jumped around 60+ pips back and forth - likely on hardly any flow at all. Today is also the last trading day of the month, which means end of month fixing based on relative market performance around the world and this could mean drastic swings in the 1200-1600 time block in London.

Be careful out there - markets may be more than a bit ghoulish on this Halloween.

Chart: EURUSD
EURUSD currently following through lower after yesterday's climax reversal. If we are seeing a bigger attempt at consolidation here, we could look for support around the current 1.2700 levels (the 0.618 retracement level) or at the 1.2550 area ( the 0.764 retracement shown below). As long as equities remain under pressure, however, we could be looking at a full resumption of the bear trend if 1.2330 gives way in the coming days, in which case a try toward 1.2000 or lower would be in order.

Risk Warnings:

Saxo Bank A/S shall not be responsible for any loss arising from any investment based on any recommendation, forecast or other information herein contained. The contents of this publication should not be construed as an express or implied promise, guarantee or implication by Saxo Bank that clients will profit from the strategies herein or that losses in connection therewith can or will be limited. Trades in accordance with the recommendations in an analysis, especially leveraged investments such as foreign exchange trading and investment in derivatives, can be very speculative and may result in losses as well as profits, in particular if the conditions mentioned in the analysis do not occur as anticipated.

Please read our full Analysis Disclosure & Disclaimer at www.saxobank.com/analysis/disclaimer.

how to trade forex

Trading foreign exchange is exciting and potentially very profitable, but there are also significant risk factors. It is crucially important that you fully understand the implications of margin trading and the particular pitfalls and opportunities that foreign exchange trading offers. On these pages, we offer you a brief introduction to the Forex markets as well as their participants and some strategies that you can apply. However, if you are ever in doubt about any aspect of a trade, you can always discuss the matter in-depth with one of our dealers. They are available 24 hours a day on the Saxo Bank online trading system, SaxoTrader.

The benchmark of its service is efficient execution, concise analysis and expertise – all achieved whilst maintaining an attractive and competitive cost structure. Today, Saxo Bank offers one of Europe's premier all-round services for trading in derivative products and foreign exchange. We count amongst our employees numerous dealers and analysts, each of whom has many years experience and a wide and varied knowledge of the markets – gained both in our home countries and in international financial centres. When trading foreign exchange, futures and other derivative products, we offer 24-hour service, extensive daily analysis, individual access to our Research & Analysis department for specific queries, and immediate execution of trades through our international network of banks and brokers. All at a price considerably lower than that which most companies and private investors normally have access to.

The combination of our strong emphasis on customer service, our strategy and trading recommendations, our strategic and individual hedging programmes, along with the availability to our clients of the latest news and information builds a strong case for trading an individual account through Saxo Bank.

Terms of trading are agreed individually depending on the volume of your transactions, but are generally much lower in cost when compared to banks and brokers. Your margin deposit can be cash or government securities, bank guarantees etc. Large corporate or institutional clients may be offered trading facilities on the strength of their balance sheet. The minimum deposit accepted for an individual trading account depends on the account type. Trade confirmations and real-time account overview are built into SaxoTrader, while further account information can be produced in accordance with your specific requirements.