Forex Reader

Every year, currency conversions cost the world millions of dollars that could be otherwise utilized in more constructive ways. Are there any solutions to this apparent waste of money?

The first attempt to unify currency was made by the European Union (EU), when it expressed the need for a common currency. But the complexity of this the procedure is apparent from the fact that though the European Currency Unit (ECU) was conceived in 1974 (as the European Unit of Account (EUA)), it took as long as 2002 to launch it as physical coins and banknotes. Has this transition from different currencies to the single Euro benefited the EU?

A benefit is the removal of bank transaction charges that previously were a cost to both individuals and businesses when exchanging from one national currency to another. Although not an enormous cost, multiplied thousands of times, the savings add up across the entire economy. (http://en.wikipedia.org/wiki/Euro)

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China’s huge foreign exchange reserve poses a risk in case there’s a significant drop in the value of the dollar; the reserves comprise large amounts of dollar assets. The National Bureau of Statistics (NBS) has suggested that China diversify its foreign exchange reserves to offset the risk of holding dollar assets.

The agency also suggested that the government should promote overseas investments by local firms while restricting capital inflows in the form of foreign investments. The Asian country also needs to work on limiting its trade surplus; it registered a record surplus of $14.5 billion during the month of June.

Other recommendations related to industries that consume a large amount of natural resources, that they be restricted, and the need to develop alternative energy sources.

A booming oil sector and a drop in the payment of external debt have contributed to a net inflow of $1.44 billion of foreign exchange for Nigeria, for the month of May. With an inflow of $2.68 billion and an outflow of $1.24 billion, these figures represent an increase when compared to the flows in April, $5.98 billion of inflow and $2.26 billion of outflow, according to a report from the Central Bank of Nigeria (CBN). All Africa reports:

Foreign exchange inflow rose by 18.6 per cent, while outflow fell by 75.9 per cent, relative to the preceding month. The increase in inflow was attributable largely to the increase in oil sector receipts which rose from US$1.93 billion in April to US$2.45 billion in May, 2006, while the decline in outflow was traceable to the sharp drop in external debt service payment from US$4.62 billion in April 2006 to US$0.11 billion in May.

This is absolutely shocking! The multinational companies that have dominated the industry for several years have been found violating the foreign exchange regulation in India. Some of the big names figured in the list, have surprised the industry experts. The Appellate Tribunal for Foreign Exchange found 11 multinational companies guilty.

Some of the major companies figured in the list are Motorola India, Nokia India, Sony India and Bank of Tokyo-Mitsubishi. The tribunal imposed a penalty of Rs 36.12 Crore ($7.8 million) on these companies. According to Directorate of Enforcement sources, the Indian arms of the companies violated the forex norms while paying salaries to their expatriate employees working here in foreign currency. It is really sad to see such big MNCs violating the government regulation in order to make profits. Other countries should take a cue from the Indian government in cracking down on such companies.

There are several points that need to be taken care of while choosing an online forex brokerage firm. You can go through the following points that will help you in choosing the right firm.

• The first important point is spread. In forex trading, spread is the difference between the buy and sell price of any currency pair. The lower spread will save the trader significant amount of money.

• It is advisable to look for a lower minimum trading opening. This is helpful for the traders who do not have thousands of dollars in risk capital to trade.

• While choosing a forex firm, go for instant execution of your orders. In addition, you must know the price you see and the price you get. There are some firms that revise their price once you click on a price. Be aware of such firms.

• Choose a firm that provides you with the best charting and technical analysis available to active traders.

• Always look for high leverage. A firm with high leverage will let you trade a large amount with a small margin deposit.

When the US dollar gained significantly in the past couple weeks, it was believed that everything was fine and those healthy trends would continues. However, those predictions turned to be wrong, as the US dollar fell sharply against major currencies in the world. The sudden slump has been attributed to the release of key data that pointed towards the weaker US economic growth in the second quarter.

The US GDP growth fell by 2.5 percent as compared to the corresponding period last year. Analysts earlier predicted a steady growth for the US economy after positive results in the first quarter of the year. The US dollar weakened against the euro and the yen, which may not be a healthy sign in the coming days.

There are many benefits and advantages of forex trading. In forex trading, a small margin deposit can control a much larger total contract value. Leverage provides the trader with the ability to make extraordinary profits and at the same time keep risk capital to a minimum. As the forex market is large, it is also liquid. Hence, it is easy to buy or sell on the online trading platform. One of the most exciting advantages of forex trading is the ability to generate profits irrespective of the status of the currency. As long as the trader picks the right direction, a potential for profit always exists.

Do you know that India is placed among the top ten economies in the world that are growing at a faster pace? It may be incredible, but true. For long, we have known India for its poverty, population growth and lack of basic amenities for its people. However, it seems that situation is improving fast. At least the growing economy of the country suggests that. India was on the verge of a economic collapse in 1991. At that time, the country’s forex reserve stood at $5.8 billion. After 15 years, the reserve has increased to $163.26 billion. In an older post titled “India’s Forex Reserves up $1.9 Billion”, I had mentioned that Indian forex reserve was on the rise. Now the picture has become more clear.

This is absolutely amazing for a country that struggled to keep the pace with other economies of the world. No other country has witnessed such a tremendous growth within a short period. There are several factors that led to high growth in forex reserve of the country. However, everyone will acknowledge that strong economic policies adopted by respective governments served as guiding force behind the Indian economy.

We all know that typhoons and hurricanes cause disruptions, so it was to be expected that normal life would be hit in the Philippines following typhoon “Kaemi”. The heavy rains forced trading to be suspended for a day (Monday) at the stock and foreign exchange markets. Business Inq7 reports:

"No forex trading today (due to) bad weather," the Central Bank governor Amando Tetangco Jr confirmed in a message by mobile phone. A similar announcement was made by Philippine Stock Exchange president Francis Lim.

The brakes are being applied on the speeding Chinese economy in the form of proposals that will impose regulations on foreign investment in the Asian country’s booming real estate market. The proposals target:

• Building projects
• Share structures
• Loans
• Foreign exchange sales of foreign-invested real estate enterprises
• Overall investment of property developers
• Residential property purchases by foreign concerns and/or individuals

Accordingly:

• Foreign institutions purchasing residential properties will have to invest an amount higher than a threshold value
• Local governments will have to monitor foreign investment on Chinese soil
• There is an increase in the ratio of registered capital in the property developer’s total investment

The proposals have been issued in a joint effort by the Ministry of Construction, the Ministry of Commerce, the National Development and Reform Commission, the People’s Bank of China, the State Administration of Industry and Commerce and the State Administration of Foreign Exchange to curb growing foreign interest in China’s real estate market. Figures show an increase of 25.4 percent in real estate with foreign investment over the first six months of 2006.