GVI Forex Analysis: Far East Open for December 15, 2008

Pre-Far East Open

•End of year trade continues to see the USD tumble against European currencies. USD weakness is often expected as a seasonal pattern by traders. Gold and oil are mixed. Dealers are looking ahead to a Fed policy easing Tuesday.

•Another focus remains on the auto bailout plan. The world did not end after an accord was not reached over the weekend, but yearend apparently is the dropdead date. The last thing the U.S. needs is another financial shock.

•The extent of the exposure to the Madoff fraud continues to be investigated. Institutions around the globe have been impacted by the mess.

•Far Eastern bourses closed sharply higher despite a poor quarterly Tankan survey from Japan. European bourses ended modestly lower. The current call for the U.S. close is for weaker. U.S. Bond prices are stronger.

•Key data U.S. Tuesday include: November CPI, Housing Starts and the FOMC policy decision. A cut in the Fed Funds rate of either -50bps or -75bps is expected.

Risk Warning:

Foreign exchange trading and investment in derivatives can be very speculative and may result in losses as well as profits. Foreign exchange and derivatives trading is not suitable for many members of the public and only risk capital should be applied. The website does not take into account special investment goals, the financial situation or specific requirements of individual users. You should carefully consider your financial situation and consult your financial advisors as to the suitability to your situation prior to making any investment or entering into any transactions.

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FOREX-US dollar tumbles after Fed cuts rates to record low

* US dollar tumbles versus euro, yen after Fed rate cut

* Fed cuts rates more than expected to record low

* Fed says may keep rates at "exceptionally low levels"

* Yen nears 13-year high; boosting intervention talks

(Adds comments, details, updates prices)

By Vivianne Rodrigues

NEW YORK, Dec 16 (Reuters) - The U.S. dollar tumbled versus the euro and the yen on Tuesday after the Federal Reserve cut its benchmark interest rates more than expected to a record low, further diminishing the appeal of the greenback.

The Fed cut its federal funds rate target to a range of zero to 0.25 percent from the previous target of 1.0 percent, and said it would use "all available tools" to dispel a year-long recession. For details, see [ID:nTRT000354].

Financial markets had expected the Fed to lower rates by no more than three-quarters of a point.

"The dollar is falling against all major currencies... because it was a larger-than-expected cut," said Matt Esteve, a foreign exchange trader at Tempus Consulting in Washington.

"On one side, we effectively have a zero interest rate in the U.S., and on the other side, the Fed has sent a sign that they are ready to use all tools to help the U.S. economy out of recession," he added.

In late afternoon trading in New York, the euro was up about 3.0 percent at $1.4099 , a 2 1/2-month high. It traded as high as $1.4144, more than five cents above its session trough of $1.3631.

The U.S. dollar had its biggest daily decline against the Swiss franc since 1995. It last traded 3.2 percent lower against the European currency at 1.1205 to the dollar .

Versus the yen, the dollar was down 1.6 percent to 89.06 , within a striking distance to a 13-year low against the Japanese currency.

The Fed's rate cut pushed the fed funds target to its lowest level on record, and the central bank said it would keep it at "exceptionally low levels for some time."

The surprise move put the Fed in unprecedented policy territory, but analysts mostly approved of the move.

"It's a highly unorthodox and creative step," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon in New York. "We think it's the best possible move for the U.S. consumer and for the financial market."

U.S. stocks rallied after the announcement, while the InterContinental Exchange's U.S. dollar index .DXY, which tracks the value of the greenback against a basket of six currencies, fell 1.8 percent to 80.628.

The Fed's rate cut move is "an incredibly strong public declaration that the Fed will throw everything it has in attempting to stabilize the financial and economic situation," Mohamed El-Erian, the chief executive of bond giant Pacific Investment Management Co, told Reuters.

"After this 'wow' statement, there should be no question about policy willingness," he added.

The U.S. dollar also tumbled against the Australian and New Zealand dollars in a sign the Fed's move may be positive for risk appetite and riskier assets.

GOLDMAN SACHS, BANK OF JAPAN

Demand for the greenback started to dwindle earlier in the session as investors cut their exposure to risk after Goldman Sachs (GS.N) posted its first loss as a public company.

The dollar's sharp drop in recent days in particular against the yen has raised speculation that Japan may intervene to stem the currency's strength as it nears a 13-year high.

U.S. data released earlier on Tuesday showed new housing starts and permits plunged to record lows in November, while consumer prices dropped at a record rate for a second straight month. See [ID:nN16549579]. [ID:nN15516550].

Analysts and fund managers said the very soft readings on inflation and continued deterioration in the housing sector support views of a very expansionary policy stance.

(Additional reporting by Steven C. Johnson, Wanfeng Zhou and Jennifer Ablan in New York;)

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FOREX-Dollar takes breather after big Fed rate cut

MARKETS-FOREX (UPDATE 1):FOREX-Dollar takes breather after big Fed rate cut

* Dollar little changed vs yen, not far from 13-year low

* Dollar pulls up from 2-A½ month trough vs euro

* Fed's historic rate cut seen keeping dollar pressured

By Masayuki Kitano

TOKYO, Dec 17 (Reuters) - The dollar hovered near 13-year lows against the yen and 2-A½ month lows versus the euro on Wednesday after tumbling the previous day as the U.S. Federal Reserve slashed interest rates to as low as zero.

In a historic move, the Fed on Tuesday cut its target for the federal funds rate to a range of zero to 0.25 percent, a record low, from 1.0 percent and said it was willing to keep rates low for an extended period.

The Fed said it would use "all available tools" to support the economy, and added that it was mulling possible purchases of longer-term U.S. Treasury debt and would consider other ways to tap its burgeoning balance sheet to support the economy.

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FOREX-US dollar hits 2-month lows; eyes on US bailout

* Dollar slides across board, hits 2-mth low vs euro

* Dollar hits 2-mth low vs basket of currencies .DXY

* Focus on fate of U.S. automakers, Fed rate decision (Adds comment, updates prices, changes byline, changes dateline, previous LONDON)

By Wanfeng Zhou

NEW YORK, Dec 15 (Reuters) - The U.S. dollar fell to two-month lows against the euro and a basket of currencies on Monday, pressured by uncertainty over the fate of U.S. automakers and reduced safe-haven flows.

The dollar was starting to respond negatively to concerns about further weakness in the U.S. economy, analysts said, after a run of weak data caused an exodus from risky positions and increased flight-to-quality buying in the currency.

Investors shunned the greenback amid fears a failure of one or more of the automakers could exacerbate a year-long recession and drag down other companies.

"The uncertain outlook for the U.S. automakers continues to keep investors wary of over exposure to the dollar at this point," said Omer Esiner, senior market analyst at Ruesch International in Washington.

"We're starting to see a shift in the market where negative data is starting to actually impact the dollar negatively, which is contrary to what we've seen for the better part of the last couple of months," he added. "We're seeing a naturally weaker dollar as we get into the year end, so bad news is only exacerbating the need for investors to just exit their long dollar positions."

In early New York trading, the euro was up 1.5 percent at $1.3570 , after climbing as high as $1.3584, the highest level since Oct. 15, according to Reuters data.

The ICE Futures U.S. dollar index, which tracks the value of the greenback against a basket of six currencies, hit a low of 82.517 .DXY., the weakest level since Oct. 20. It last traded down 1.3 percent at 82.606.

A more upbeat tone in the global equities market also helped ease extreme risk aversion, reducing the greenback's safe-haven appeal and boosting demand for higher-yielding currencies.

The Australian dollar rose 1.1 percent and the New Zealand dollar was up 1.5 percent .

Against the yen, the dollar fell 0.9 percent to 90.31 , after hitting a more than 13-year high of 88.10 yen on Friday. But yen gains were capped on speculation that Japanese authorities could intervene to stem further currency strength.

BAILOUT IN FOCUS

The White House said on Friday it was considering tapping a $700 billion financial industry bailout fund to prevent a collapse of ailing U.S. automakers. That came after the U.S. Senate on Thursday rejected a bailout plan to avert a possible bankruptcy by one or more of the nation's three automakers.

But U.S. President George W. Bush said on Monday an announcement on a car industry rescue was not imminent, leaving the industry's fate clouded [ID:nN14461208].

Investors also awaited the outcome of a policy meeting by the Federal Reserve on Tuesday to see how close to zero the U.S. central bank will cut interest rates and what alternative measures it will take to boost the economy. The Fed is widely expected to cut rates by at least 50 basis points from the current 1 percent.

"What the Fed says will likely overshadow its rate move," currency strategists at Brown Brothers Harriman, wrote in a research note. "Many investors are looking for insight into where the Fed anticipates ending the rate cuts and what other non-traditional steps will the Fed adopt." (Additional reporting by Naomi Tajitsu in London; Editing by Chizu Nomiyama)

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US Dollar Loses Correlation With Dow Jones, Forex Market Continues to Track Oil

Forex correlations have taken an interesting turn through recent trading, as the safe-haven US dollar has seemingly lost its link to the US Dow Jones Industrials Average—potentially removing a key pillar of support for the US currency. Dismal risk sentiment previously led to a sharp unwind of USD-short positions, and the Greenback benefited from sharp declines in global risky asset classes. Yet more recent price action left the US Dollar significantly lower despite losses in the DJIA and other risk barometers. All else remaining equal, such a shift in correlations bodes poorly for the USD against similarly risk-sensitive currencies. That being said, the Japanese Yen continues to trade almost tick-for-tick with the Dow Jones and other major equity indices.

Forex Correlations Summary

Forex correlations against Oil, Gold, and the Dow Jones Industrials Average for the past 20 trading days:

Strongest Forex Correlations

US Dollar/Japanese Yen and the US Dow Jones Industrials Average The US Dollar has recently lost its correlation with the Dow Jones, but the Japanese Yen’s link to risk sentiment remains rock-solid. The extremely low-yielding currency has almost invariably rallied in the face of stock market losses, and a persistently sky-high rolling correlation between the JPY and DJIA suggests that this is unlikely to change through the foreseeable future. In fact, some traders report using the Japanese Yen as a proxy for trading movements in the Dow—especially against similarly high-yielding carry trade currencies.
British Pound and the G10 Forex Carry Trade Index The British Pound has shown an increasingly strong link to the G10 Forex Carry trade, and it seems that speculative capital flows have punished the GBP about as much as high-volatility carry trade currencies. According to the Deutsche Bank Carry Trade Basket index, the G10 carry trade has lost about 5 years of previous gains in a matter of months. The ongoing theme of global deleveraging played a very large part in the carry trade unwind, and correlations suggest that the British Pound fell victim to the same dynamic. A continuation leaves the British Pound susceptible to speculative capital flows.
Australian Dollar and Reuters/Jefferies CRB Commodity Index The Australian Dollar has recently renewed its link with global commodity prices—trading virtually lockstep with the popular Reuters/Jefferies CRB Commodity Index. Major export commodities such as iron ore and gold remain a key component of Australian Dollar demand, and sharp drops in raw materials prices tends to lead to similar depreciation in the Australian currency. We envision that such a link will remain strong through the foreseeable future—especially as commodity prices remain extremely volatile.

Weakest Forex Correlations

US Dollar and the US Dow Jones Industrials Average The US Dollar has very recently stopped tracking moves in global risky asset classes—making its correlation with the Dow Jones Industrials Average virtually insignificant. The chart shown shows that the medium-term correlation remains historically high, but this measure ignores the past week of price action. If recent trends are any indication, the US Dollar could lose its safe-haven status in the face of continued global financial deleveraging. Such a shift would prove quite bearish for the previously high-flying US currency.

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Forex News and Rumors

US Industrial Output Fell Less Than Expected

US Industrial Output was expected to fall by 0.8 percent for the month of November; however, actual output declined slightly less than projections at 0.6 percent. More

Dollar Rally May be Coming to an End

With billions of dollars flooding into the market in the guise of economic stimulus plans and other assorted bail-outs, analysts suggest that the US dollar will fall against most of the major currencies.

“The dollar will go to new lows as the U.S. attacks its currency,” said John Taylor, chairman of New York-based FX Concepts Inc., which manages about $14.5 billion of currencies. More

Oil Cuts Expected Ahead of OPEC Announcement

The Organization of the Petroleum Exporting Countries (OPEC) is expected to announce “significant” production cuts in an attempt to reverse falling crude prices which are hovering near a four-year low. More

Canadian Dollar Gains on Oil Price Increase

The Canadian dollar gained against the US dollar as stock markets rebounded and the price of crude rose on expectations of an OPEC production cut. More

Outlook for UK Pound Worsens

The British pound continued to struggle against the euro and everyday seems to fall to yet another record low. Currently, the euro is at 89.98p and threatens to break through the 90p level and many analysts suggest that the euro could soon be at parity. More

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Florida forex scam nets guilty plea

A Florida man has pleaded guilty after being found to be the head of fraudulent foreign currency exchange companies.

Mitchell Goldberg has pleaded guilty to two counts each of wire fraud and mail fraud, in a scam that prosecutors say netted $11 million.

Five others were charged with participating in the scheme that was based on the buying and selling of foreign currencies.

In the scam, clients were promised rates of return as high as 300 percent, but, even on poor performance trades, were charged unreasonable commissions

Prosecutors sayd about 475 clients lost about $11.5 million from Goldberg’s operation.

Goldberg could be sentenced to 12 years in prison. He is scheduled for sentencing on February 20th.

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Forex Trading Tip: Don't Get Greedy

Take your profits -- even if they are smallA forex trading tip that I find especially applicable in the current climate is this one: Don't get greedy.

Sometimes, it can seem like a good idea to run your profits. Your position is doing well, and you want to take it just a bit further. Right now, though, with volatility high, this could be a way to turn a winner into a loser.

You never know when a currency that is gaining is going to suddenly reverse and start losing. (This is happening with the end of the dollar rally right now.) So, if you have a profitable position on the currency market, it might be a good idea to exit while you are ahead.

There will be other trades.

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Forex and Dow Jones recommended levels

EUR/USD

Todays support: - 1.2926, 1.2877 and 1.2858 (main), where correction is possible. Break would give 1.2837, where correction also may be. Then follows 1.2808. Break of the latter would result in 1.2784. If a strong impulse, we would see 1.2737. Continuation will give 1.2692.

Todays resistance: - 1.3016(main). Break would give 1.3038, where a correction is possible. Then goes 1.3061. Break of the latter would result in 1.3096. If a strong impulse, wed see 1.3112. Continuation will give 1.3143 and 1.3182.

USD/JPY

Todays support: - 92.26, 92.14 and 91.80(main). Break would bring 91.60, where correction is possible. Then 91.36. If a strong impulse, we would see 91.07. Continuation would give 90.90.

Todays resistance: - 93.18, 93.48, 93.88 and 94.17(main), where a correction may happen. Break would bring 4.33, where also a correction may be. Then 94.52. If a strong impulse, we would see 94.84. Continuation will give 95.43 and 95.84.

DOW JONES INDEX

Todays support: - 8640.18 (main), where a delay and correction may happen. Break of the latter will give 8627.36, where correction also can be. Then follows 8592.10. Be there a strong impulse, we would see 8561.20. Continuation will bring 8506.00 and 8642.76.

Todays resistance: - 8827.20, 8867.14 and 8930.30 (main), where a delay and correction may happen. Break would bring 8973.22, where a correction may happen. Then follows 9020.00, where a delay and correction could also be. Be there a strong impulse, wed see 9047.90. Continuation would bring 9091.40.

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Forex: Getting email signals for trading

You do not know me but I read a column you wrote in The Punch, which I find very interesting because I also trade in forex though I am a beginner. I would like to know how somebody could get an e-mail signal before entering a trade.

You can get forex signals by email if you have an arrangement with the signal generator. Very often, they will charge for their services. If you know a good trader that uses Metatrader 4 and he or she is willing to give you signals, it can be easily configured on their computer with a small script, such that every time they make a trade, their Metatrader 4 terminal will send an email with the parameters of the trade to your email.

It can also be configured such that the terminal sends the email signal to an email group for distribution to the group members.

In addition, the terminal can send the email to an Email- To-Sms gateway, which then sends you the signal by sms, or distributes it to a group of mobile numbers.

This way such a trader makes extra income from selling trade signals at no extra cost or labour. Usually these signals arrive at least a minute late, so if the traders strategy is a very short term one (scalping) that targets anything less than 20 to 40 pips gain or uses a stop loss just as tight, the signal may be dangerously late.

For longer term daily or weekly trades however, it should be alright, provided the signal generator was right. You can run a search online for forex email signal providers.

Just remember that the signal is only as good as its generator, so you would need to do some due diligence on the signal generator‘s strategy and previous performance.

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FOREX-Dollar down as risk tolerance rises on auto bailout

* Yen slides, dollar dips vs euro on US auto bailout hopes

* US could vote on rescue plan as early as Wednesday

* BoJ's Shirakawa comments on FX mkt weigh on yen

* For up-to-the-minute market news, click on FXNEWS

(Recasts, updates prices, adds quotes, changes byline, changes dateline, previous LONDON)

By Nick Olivari

NEW YORK, Dec 10 (Reuters) - The dollar slipped to a two-week low against the euro while the yen fell broadly on Wednesday as a tentative agreement by U.S. lawmakers to rescue American automakers helped calm investor sentiment.

The White House and congressional Democrats reached a deal in principle on a $15 billion plan to bail out and restructure auto firms, with officials saying the House of Representatives could vote on it as early as Wednesday [ID:nN09294627].

"The market is still feeding off hopes for mass fiscal stimulus in the U.S. once (President-elect Barack) Obama takes office," said Stephen Malyon, chief currency strategist at Scotia Capital in Toronto.

Specific to the auto bailout, "in so far as how it is boosting equities, that is important for the foreign exchange market."

U.S. stock futures rose on Wednesday, a sign of rising risk tolerance, due to bailout hopes. That led to an easing of the move to unwind carry trades, which use the yen -- whose interest rate is near zero -- to fund purchases of higher-yielding assets.

In early New York trade, the euro edged up 0.3 percent to $1.2948, having earlier hit a two-week high of $1.3004, according to Reuters data.

The dollar rose 0.7 percent to 92.78 yen , while the euro EURJPY gained 1.1 percent to 120.28 yen. The yen was down 1.2 percent against the Canadian dollar , 0.7 percent against the Swiss franc and 1.1 percent against the pound , according to Reuters data.

Analysts said fears of Bank of Japan intervention to prevent too much yen strength also weighed on the currency after BoJ Governor Masaaki Shirakawa said on Wednesday he was watching forex moves carefully [ID:nTKF003197].

But few expected action any time soon.

"A comment from BoJ Governor Shirakawa that the Ministry of Finance has the option of intervening was a statement of fact to lawmakers rather than a hint that intervention is imminent," said Brown Brothers Harriman in a note to clients.

Analysts said trading in recent days is less active than usual with little economic data to drive market moves and investors beginning to wind down for the year-end holidays.

"We're seeing subdued days in foreign exchange markets," said Scotia's Malyon. "We are also in a week where there is not a lot of direction."

US BAILOUT IN FOCUS

Analysts believe the falls in the yen are likely to be short-lived as global recession fears keep risk aversion high.

The prospect of interest rates in other developed countries falling towards the low rates in Japan will also keep the Japanese currency supported, they said.

Traders waited to see whether the House of Representatives would approve the automaker bailout, which includes conditions to provide low-interest loans to avert a threatened industry collapse if one of the three U.S. auto firms were to fail.

Some market participants are sceptical on whether such a plan, if passed, would actually save the struggling auto sector, while others argue that it would ultimately do little to cure the global recession.

"The market may yet reach a stage where interest in risk assets cannot be justified by the underlying conditions in the global economy," analysts at UBS said in a research note. (Additional reporting by Jessica Mortimer in London, Editing by Chizu Nomiyama)

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ICICI Bank’s forex trading platform for corporates

NEW DELHI: In a bid to mitigate forex risk for large corporates, ICICI Bank has developed a customised online trading platform that would enable companies to cover their market risk in different currencies and assist in taking financial decision.

“ICICI Bank E-Dealz through the full-fledged customised system, can now book the forex deals in less than 5 minutes, something that took a day earlier,” ICICI Bank Head Global Markets Group, Ms Shilpa Kumar said.

The system has the capability of booking the trades from centralised or decentralised client location, she said, adding it provides the real time deal log with complete deal history and captures the efficiencies of straight through processing.

To begin with, the customised solution is subscribed by the ABB Ltd, a global leader in power and automation technologies, she said.

With this particular forex solution, Kumar said, the bank is targeting customers who do significant number of forex transactions on daily basis.

Commenting on the solution, ABB Ltd said it is efficient, transparent and has focus on treasury management rather than treasury administrative work.

The consolidated portfolio view makes the trade execution very efficient and now the company can track its cash flows from export and import remittances from different location on a real time basis, ABB Ltd country Treasurer Mr Sundaram Nagasamy said.

These remittances were earlier exposed to market risk due to high volatility in currency market, he said. - PTI

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FOREX-Dollar dips as auto bailout hopes boost risk tolerance

* Dollar dips vs euro, yen slides on US auto bailout hopes

* BoJ's Shirakawa comments on FX market weigh on yen

* Pimco's El-Erian says USD gains to fade sometime in 2009

* For up-to-the-minute market news, click on FXNEWS (Updates prices, adds quotes, changes byline)

By Steven C. Johnson

NEW YORK, Dec 10 (Reuters) - The dollar fell to a two-week low against the euro on Wednesday and the yen weakened as U.S. lawmakers reached tentative agreement to extend emergency loans to the ailing auto industry, helping to calm investor anxiety.

Stocks rose and investors' rush into safe-haven assets such as U.S. Treasury debt slowed, temporarily undermining the dollar's appeal and lifting other currencies such as the euro.

The low-yielding yen also fell as the pendulum swung back in favor of currencies and assets that offer a higher return.

The impetus for Wednesday's moves was news the White House and Congressional Democrats had reached a deal in principle on a $15 billion plan to help automakers restructure and avoid bankruptcy For details, see [ID:nN10505833].

"It's safe to say risk appetite has improved somewhat, and that has a lot to do with talk of an imminent bailout for the U.S. auto industry," said Omer Esiner, chief market analyst at Ruesch International in Washington.

With the year winding down, Esiner also said investors are taking profits on the dollar's recent rise. That has added to pressure on the U.S. currency and may persist into January.

Late afternoon, the euro was up 0.8 percent at $1.3022 after earlier hitting a two-week high of $1.3070. It rose 1.4 percent to 120.70 yen while the dollar added 0.6 percent to 92.64 yen .

The yen also fell sharply against the Canadian dollar , the Swiss franc and the pound , according to Reuters data.

Analysts said fears of Bank of Japan intervention to prevent too much yen strength also weighed on the currency after BoJ Governor Masaaki Shirakawa said on Wednesday he was watching forex moves carefully. [ID:nTKF003197]

Sterling rose 0.4 percent to $1.4789 while the dollar fell 0.6 percent to 1.1985 Swiss francs .

MORE RISK AVERSION TO COME

Analysts were quick to point out, however, that the uncertainties facing the global economy meant a relapse into risk aversion was still likely.

One sign of just how parlous the economic outlook is came when China said its exports and imports shrank unexpectedly in November, sparking fears that global demand has vanished. [ID:nPEK31604]

In the United States, while an auto deal looked set to pass the House of Representatives, some Republicans sowed doubts about possible snags in the Senate [ID:nWEN162].

That weakened stock markets and helped the dollar and yen pare some of the losses seen earlier in the session, though both remained down on the day.

In the longer run, though, analysts expect the dollar's rise to fade next year as markets stabilize and investors stop seeking relative safety in the U.S. currency.

"If you analyze why the dollar has strengthened, it has more to do with the rest of the world than with the U.S.," said Mohamed El-Erian, co-chief of Pacific Investment Management Co, at a Reuters Investment Summit in New York on Wednesday.

The euro and sterling, for instance, fell sharply as the euro zone and British economies slowed and their central banks cut interest rates.

He said when "that stock adjustment is over, which we believe will be in 2009, the dollar (will fall)" but added that it's still premature to bet against the greenback.

"You don't want to be 'shorting' the dollar until you have evidence the de-leveraging has run its course. Our sense is that ... three-fourths of the de-leveraging has taken place." (Additional reporting by Nick Olivari; Editing by Chizu Nomiyama)

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Forex Trading: The Most Common Flaws

Many traders are very much attracted to the sophistication offered by the multi indicators and use them in their forex trading systems. Many of the confluence system indicators show the price movement and in no way adds any value to the trade. Due to this, the traders either end up over bought or over sold technical indicators like the stochastic, momentum indicators, candle stick chart pattern recognition, Bollinger band breaks out even neural networks which are supposed to be artificial intelligent systems. The technical indicators just show signals which are similar to buy or sell or hold, making the signal generated to be correct. Theoretically it sounds good but in reality to arrive at a conclusion might be difficult. As a result the traders are confused in making a right decision. They either enter too late or too early or remain still without being able to make a decision to enter the market. The major flaw is due to the use of useless trading system which does not serve the purpose to make profits, but confuses the traders and complicates the forex trading until the trader loses.

Another dangerous flaw found in forex trading is of an emotional nature interwoven into the process. It is fear and greed of the trader. A profitable forex trade can lead to exuberance and over joy, but this is the time when greed comes in and crosses the aspects of risk management. When a trader is hooked to winning, out of greed he over-rides all aspects to see more and more profits, only to see them crash to earth. They wait for the prices to regain, but in dismay may some time and with press release distribution possible losses. This is the time when fear crops up and paralyses the trader not making him to open up any position. Hence while trading, the trader should not override the emotional side of trading, stick to discipline of the trade which can prevent them from committing the flaw of forex trading.

Another kind of flaw can happen when the trader is an unconcerned person or the one who is lazy, or with no drive to gain profits or feels the need to be profitable. These people would have entered into forex trading due to hearing it as an easy game. For them pr newswire release not a trade which involves skill, trade management, preparation and re-investment. It is a fun game for them, where loses do not make any difference to them. Such persons make a wrong footing, with a wrong objective.

Flaws in forex trading due to the inadequate knowledge of the trader:

Some of the losers start with good purpose in the trade. Even though they had gained some knowledge from here and there they might find it difficult to apply them practically in the trade. Inadequate knowledge might be the major flaw which stops them from achieving success.

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FOREX-Dollar gains vs most majors; euro zone data weak

* Euro flops vs dollar , yen

* German ZEW sentiment beats forecast; conditions weak

* Risk demand still low, Japan growth contracts

* For up-to-the-minute market news, click on FXNEWS

(Recasts, updates prices, adds quotes, changes byline, changes dateline, previous LONDON)

By Nick Olivari

NEW YORK, Dec 9 (Reuters) - The dollar gained against most currencies, including the euro, on Tuesday though with no major U.S. data scheduled for release, investors took their cue from investor sentiment in the euro zone's largest economy.

The Mannheim-based ZEW economic think tank's poll of economic sentiment unexpectedly rose to -45.2 in December from -53.5 in November, but the current conditions component worsened. [nSAB020603].

Uniformly grim UK economic data also put the British pound under pressure, as economists pointed to further cuts in Bank of England interest rates. [nL9702067].

"The ZEW is not going to do the euro any favors," said Ron Simpson, director of FX research at Action Economics in Tampa, Florida. "And incoming UK data is poor at best, putting the pound under pressure."

The euro fell 0.9 percent to $1.2821 in early New York trade, down from a session peak of $1.2968, according to Reuters data, its strongest level since November 25.

Sterling fell 1.4 percent on the day to $1.4695, while the euro hovered near record highs reached the previous day against the UK unit .

Demand for risk was generally low after figures earlier on Tuesday showed the Japanese economy contracted 0.5 percent in July-September, far more than an initial reading of a 0.1 percent decrease [ID:nT356356].

The dollar was 0.3 percent weaker against the yen at 92.54 yen .

Yen strength pushed the euro down 1.2 percent to 118.70 yen . The higher-yielding Australian and New Zealand dollars were down more than 2 percent against the low-yielding Japanese currency.

Sterling also dropped 1.7 percent against the yen as investors continued to unwind carry trades, where the yen was used to fund investments in higher-yielding currencies.

Investors were also wary of taking on risk as they awaited a U.S. emergency loan package for its top three automakers, while figures late last week showed that the U.S. lost more than half a million jobs in November alone [ID:nN08534770].

"The harsh reality of global weakness is still coming through in markets," said Stephen Koukoulas, strategist at TD Securities in London.

Rapidly deteriorating economies have prompted central banks to slash rates aggressively.

The dollar was up 0.9 percent against the Canadian dollar at $1.2661 after the Bank of Canada unexpectedly cut its key interest rate by 75 basis points to a 50-year low of 1.5 percent on Tuesday and declared the Canadian economy to be in recession. [ID:nBAC000266]. (Additional reporting by Veronica Brown in London) (Reporting by Nick Olivari, Editing by Chizu Nomiyama)

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Forex Trading Systems – Avoiding Scams and Finding One For Big Profits

The first thing to look for with any forex trading system is the track record and if you see the disclaimer below be extremely cautious. We will explain what it means in a moment but for now here it is and its required by the CFTC.

“HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR online master degrees IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOW”

If you have read the above and understood it, you will see that vendors can simply make track records up (and they do), as they can use past data and say what they want! So long as they put this disclaimer on the material their covered.

Of course most forex traders simply concentrate on the gains and do realize these track records are actually meaningless.

Anyone can do a track record in hindsight, knowing the closing prices but it’s not so easy in real life – we have to trade forward!

The fact is most of the currency trading systems sold on the net today are never traded at all - there simply done by marketing people and track records are made up to appeal to the greed and naivety of investors.

So the first step is simply to ignore any forex trading system that does not have a real time track record and believe me, you have cut out at least 95% of systems.

You may say well there must be some honest guys out there selling systems?

Yes there are and some simulations do come good (a small minority) but why should you risk you money?

If the vendor hasn’t the confidence to trade neither should you.

Once you have found a real time track record look for the following:

1. It is over a reasonable period of time at least 3 years.

2. Check the drawdown and look for the worst peak to valley drawdown to see if its in line with your risk – reward criteria.

3. Check the logic is revealed so you can have confidence in it

4. Check the support and find out if you are comfortable with the vendor

While a real time track record does not guarantee profits it is a good indication of the potential of the system and if you know how it works and are comfortable with its worst peak to valley drawdown and time to recovery chances re you can follow it with discipline.

Don’t look to make a fortune over night – the best systems will do up to 50% per annum and that will build you fantastic compound gains over time.

If you want bigger growth you will find many simulations offering you more but you know what will happen if you buy it!

Be sensible when buying forex trading systems and remember, all those track records that look to good to be true are! There is no “free lunch” when it comes to make money.

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FOREX-Dollar climbs vs most majors; euro zone data weak

* Dollar rallies vs most majors

* German ZEW sentiment beats forecast; conditions weak

* Risk demand still low, Japan growth contracts

* For up-to-the-minute market news, click on FXNEWS (Recasts, updates prices, adds quotes)

By Nick Olivari

NEW YORK, Dec 9 (Reuters) - The dollar rose against most currencies on Tuesday though with no major U.S. data to provide direction, trading was based on technical levels or economic reports from the UK and elsewhere.

The euro clawed back from the session low with investors testing whether they can push the single zone currency through the upper level of its most recent range, analysts said.

Earlier the the market took its cue from investor sentiment in the euro zone's largest economy. The ZEW economic think tank's poll of German economic sentiment unexpectedly rose to -45.2 in December from -53.5 in November, but the current conditions component worsened. [ID:nSAB020603].

Uniformly grim UK economic data also put the British pound under pressure, as economists pointed to further cuts in Bank of England interest rates. [ID:nL9702067].

The dollar did trim losses against the yen and gains against the euro after a report showed a smaller-than-expected drop in pending existing home sales for October, which raised cautious optimism of some stability in the distressed housing market. [ID:nN0975120].

"There is some medium-term resistance at $1.2965 and that is a target dragging some players to test that level and if we break through, there will be a test of the psychologically important $1.3000 level," said Michael Woolfolk, senior currency strategist at Bank of New York Mellon on the euro/dollar.

The euro was little changed against the dollar at $1.2935 midway through the New York session, down from a session peak of $1.2968 but also far above the session low of 1.2798, according to Reuters data.

Sterling fell 0.9 percent on the day to $1.4774, while the euro hovered near a record high against the UK unit .

"The ZEW is not going to do the euro any favors," said Ron Simpson, director of FX research at Action Economics in Tampa, Florida. "And incoming UK data is poor at best, putting the pound under pressure."

Demand for risk was generally low after figures earlier on Tuesday showed the Japanese economy contracted 0.5 percent in July-September, far more than an initial reading of a 0.1 percent decrease [ID:nT356356].

The dollar was 0.4 percent weaker against the yen at 92.43 yen .

Yen strength pushed the euro down 0.5 percent to 119.54 yen . The higher-yielding Australian and New Zealand dollars were down around 1.7 percent against the low-yielding Japanese currency.

Sterling also dropped 1.4 percent against the yen as investors continued to unwind carry trades, where the yen was used to fund investments in higher-yielding currencies.

Investors were also wary of taking on risk as they awaited a U.S. emergency loan package for its top three automakers, while figures late last week showed that the U.S. lost more than half a million jobs in November alone [ID:nN08534770].

"The harsh reality of global weakness is still coming through in markets," said Stephen Koukoulas, strategist at TD Securities in London.

Rapidly deteriorating economies have prompted central banks to slash rates aggressively.

The dollar was up 0.5 percent against the Canadian dollar at C$1.2602 after the Bank of Canada unexpectedly cut its key interest rate by 75 basis points to a 50-year low of 1.5 percent on Tuesday and declared the Canadian economy to be in recession. [ID:nBAC000266].

The greenback also gave up some gains against the loonie as the session wore on however, with the U.S. currency more than a Canadian cent off the session peak of C$1.2743. (Additional reporting by Veronica Brown in London) (Editing by Andrea Ricci)

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Forex Charts - Novice Trading Mistakes

It’s the same with forex charts 95% of users drown – Let’s look at common errors that novice traders make and how to avoid them.

1. Predicting Price

No one can predict price movement and if you do - you are simply hoping levels will hold.

Do this and you will be wiped out quickly the market wont reward you for hoping or guessing.

If you want to win, act on the reality and that means - trading with price momentum AFTER a test of the level you are looking at.

Trade with momentum on your side and you are trading a fact and your odds of success are increased dramatically.

If you don’t use momentum indicators in your forex technical analysis learn what they are quickly.

2. Indicators Chosen and Misuse Of Them

A common error is to use lagging indicators to enter trades such as moving averages – This really leads on from the above: A

Always use momentum indicators to enter trades and only use lagging indicators to determine levels of support and resistance.

Many indicators traders use are useless good examples are:

Fibonacci levels and cycles - they again involve prediction and simply help wipe out equity.

3. Trading Invalid Data

Day traders are the worst offenders here. They are picking a short time frame where volatility is random they can’t calculate the odds - so they lose.

4. Systems that are to complicated

Some people devise very clever systems and lose.

Fact is - in forex trading you get your reward for being right – NOT Being clever.

Simple systems are best - as they are more robust and have fewer elements to break.

5. Not understanding volatility

Do you know what standard deviation of price is? If you don’t learn it backwards as this will help you determine everything from stop levels to targets for your trades and help you stay in winning trades longer and get better money management.

6. Your edge

Ask yourself this question:

What is your trading edge which will see you win when 95% of traders lose?

If you don’t know what it is – then find out or do more work on your forex trading strategy!

If you don’t know what your edge is kiss goodbye to your equity.

7. Following a method

Many traders have perfectly good methods but simply don’t have the discipline to follow them – if you dont have discipline you have no method in the first place.

If you want to enjoy currency trading success don’t make the mistakes above or you will lose.

Finally, there are a lot of vendors on the net promising you untold riches from their currency trading systems, for just a few hundred dollars – its not that easy so don’t buy them.

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FOREX-Yen rises as stock drop saps risk tolerance

MARKETS-FOREX (UPDATE 1):FOREX-Yen rises as stock drop saps risk tolerance

* Yen advances vs dollar, euro as Tokyo shares fall

* Euro underpinned by prospect of Fed rate cut next week

* Focus stays on fate of US automaker bailout

By Kaori Kaneko

TOKYO, Dec 11 (Reuters) - The yen advanced against major currencies on Thursday, recovering some of its losses from the previous day as stocks fell, making investors less risk tolerant.

Asian shares fell despite gains on Wall Street, making investors return to the relative safety of the low-yielding yen.

But market participants said currencies were unlikely to move much as trade winds down towards the year-end, with moves likely to be led by big institutional players.

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Forex Day Trading – Picking the Best Systems for Profit

The first consideration is the track record that is presented with the day trading system or method. If you see a track record you are almost certain to see this disclaimer which is required by the CFTC read it fist and we explain EXACTLY why rack records that have this disclaimer on need to be avoided. So here it is:

“HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR online courses from IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOW”

This disclaimer allows any vendor to make up a track record - there designed with hindsight KNOWING the closing data!

How on earth can you take a track record like this seriously?

Lets face it, anyone who can read and write can make money in hindsight but the problem is we don’t have the benefit of hindsight when we trade – we have to trade not knowing the prices and this is much harder.

If you see any day trading system sold, you will get one of these disclaimers and you should ignore them.

The obvious track record to look for then is a real one but in day trading you wont find one of these ( or if you do let me know) and the reason is day trading simply doesn’t work.

The biggest myth of forex trading is that day traders make money – they don’t.

The reason is really common sense.

You have millions of traders each day trading trillions of dollars in currencies and to say that you can measure what they can do in a few hours is laughable.

All short term volatility is random and prices can and do go anywhere and day traders lose longer term because, they have no chance of getting the odds on their side – PERIOD.

So if day trading makes no money why are there so many systems sold?

The answer is it’s a good story and the vendors who sell these systems (mostly marketing companies or failed brokers) rely on clever copy, to appeal to online courses from and naivety of buyers who don’t think twice before buying, assuming the track records they see, give them a chance of making similar gains – of course they are destined to fail.

The reality of day trading systems is the vendor wins by selling the system, to the mug punter who then loses in the market and wonders why!

Don’t fall for the trap of believing these systems can make you money, or that day trading works – if you do you will lose all your money.

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Forex Laid Bare: An Expert Explains All

By Shura Collinson

Staff Writer

Understanding the mechanisms and factors influencing foreign exchange rates can be a tricky matter for those outside the industry. Amid talk of financial crisis, possible devaluation of the ruble and rising inflation, The St. Petersburg Times asked local expert Ruslan Abushaev, an analyst at FxCompany, to help decipher the mysteries of the Forex.

What factors affect exchange rates?

The rate or value of any currency is determined by the volume of demand and availability of this currency on the market. In order to buy goods or assets in any country, the buyer must first purchase the currency in which the value of the asset is set. As a result, the higher the demand for goods or services from a certain country, the higher the demand and therefore the value of the currency of that country.

The main figures in currency trade are commercial banks, which either represent clients, exporters or importers, or buy and sell currency in their own names for investment or speculative purposes. The exchange rate is defined by its “profitability,” i.e. the percentage rate at which it is possible to take out a loan in that currency on the interbank market, which in turn depends on the demand for that currency. A decrease in money supply on the internal market leads to an increase in the demand for currency on the external market — if central bank rates increase, then the exchange rate of the currency increases.

In an ideal situation, currencies with higher percentage rates will grow against currencies with lower percentage rates. However, along with current percentage rates, other factors can influence exchange rates, including expectations of changes in rates according to macroeconomic situations in the country, rumors and the mood of investors. Political factors also play a role, such as speeches by politicians, regional conflict and war.

How are foreign exchange rates connected to inflation?

“Profitability,” or the percentage rate of one currency or another set by the central bank, is determined primarily by the level of inflation in the country. Inflation is the devaluation of money during an increase in demand for goods or services. In other words, if inflation increases, the national currency loses its value relative to goods and services. The central bank, whose responsibilities include maintaining the solvency of the national currency, in the event of extreme growth in inflation increases percentage rates with the aim of reducing money supply. In this case, inflation stops growing, as the value of capital increases, and demand for goods falls (as a result of higher lending rates). In this way, by observing the rate of inflation, it is possible to predict how the key percentage rate will change.

What steps is the Russian government taking to stabilize the ruble?

The ruble is closely watched by the central bank, which regulates its value in respect to other currencies. The central bank uses several methods to change the volume of money in the country, including changing refinancing rates (the rate at which the central bank lends to commercial banks); changing the levels of reserve requirements (the amount of deposited funds that commercial banks have to keep invested in the central bank); and market operations such as buying and selling stocks and securities, currency or other liquid assets with the aim of creating or absorbing liquidity and thereby increasing or decreasing the value of money on the market.

Are speculators a stable influence or do they interfere with economic policy?

Speculators are a separate group of trade participants on the market. They buy and sell assets on a short-term basis, making money as a rule from temporary changes in prices. It could appear that speculators bring confusion and unnecessary volatility to the market, but upon closer inspection, it becomes clear that thanks to speculators, the price for a certain asset on the financial market reflects all the factors that could affect it, and is therefore accurate and reliable. In addition, as a result of the actions of speculators, this is achieved in a very short space of time.

What is the role of hedge funds, insurance companies and pension funds in foreign exchange rates?

Another group of traders on the currency market is long-term investors, who include hedge funds, insurance companies and pension funds. Their main task is to preserve capital, minimize risks and make a little profit, since most of the funds of such companies belong to their clients. Such funds diversify their investment portfolio with different assets, securities and currencies.

What currencies are most heavily traded?

On the global foreign exchange market, almost all existing and convertible currencies can be traded, but not all currencies are of interest for traders. The reason is that some currencies are less liquid than others, and as a result brokers charge a higher commission for buying and selling them.

The news and macroeconomic statistics published daily relate more to the most popular and sought-after currencies, and consequently their listings are more widely predicted than those of less sought-after currencies.

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FOREX: Ringgit Higher Against U.S Dollar In Early Trade

KUALA LUMPUR, Dec 15 (Bernama) -- The ringgit was higher against the U.S. dollar in the early trading today with support from commercial buying, dealers said.

At 9.06 am, the local currency strengthened against the greenback at 3.5650/5700 from 3.5800/5850 at the close last Friday.

According to a dealer, the ringgit is expected to trade within the range of 3.53 to 3.60 against the U.S. dollar this week.

He said there could be an upside for the ringgit towards the end of the year as more companies exchange foreign currency for the local unit to balance their year-end accounts.

Compared to other major currencies, the ringgit traded almost lower in the early trading.

Against the Singapore dollar, it was lower at 2.4049/4105 from 2.3963/4015 at the close last Friday, but it was higher against the Japanese yen at 3.9120/9179 from 3.9619/9697 previously.

The local unit weakened against the British pound at 5.3475/3564 from 5.3188/3284 and it was lower against the euro at 4.7956/8038 from 4.7539/7620.

-- BERNAMA

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Forex Scams on Rise Amid Weak Regulation

By Natasha Afanaseva

Staff Writer

In its annual report this year, the U.S. Commodities Futures Trading Commission (CFTC) — the body which oversees the Forex market — released a report stating that over the last few years it has seen a steady increase in the number of foreign exchange scams around the globe.

A Forex scam is defined as any trading scheme used to defraud individual traders by convincing them that they can expect exceptionally high profits by trading on the Forex market.

“The U.S. Commodity Futures Trading Commission, which loosely regulates the foreign exchange market in the States, investigates such attempts to mislead,” said Gavriil Levi, general director of CMS Russia. “All the brokers registered in the U.S. are supervised by regulatory bodies and are subject to an obligatory audit of their promotional materials to eliminate scams.

“In Russia, though, the Forex market is not regulated by any governmental bodies, which leaves room for misleading information and even scams. When choosing a broker, an individual should carefully study their background and search for one regulated by governmental bodies with full operating licenses,” Levi said.

Although the Forex is perhaps the “most international” of global markets, controls on activities within Russia itself remain limited, with just one organization, KROUFR, providing oversight for the market and attempting to provide at least some regulation, although it can provide little support for those seeking redress in court.

Thus, experts say, advice given with regard to avoiding scams is much as the same as general advice on avoiding con artists. Firstly, stay away from opportunities that sound too good to be true, especially if vast profits are “guaranteed” with “no risk.” Secondly, unless you really understand what’s going on, don’t get involved — in this context that means that you shouldn’t trade on margins unless you genuinely understand them. And thirdly, be very wary of sending or transferring cash on the Internet or by mail.

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FOREX-Dollar pressured broadly after bold Fed move

* Dlr hits 2-1/2 mth low vs euro, near 13-year lows vs yen

* Fed's historic rate cut seen keeping dollar weak

* BoJ seen cutting rates later in the week

(Adds quotes, updates prices)

By Veronica Brown

LONDON, Dec 17 (Reuters) - The dollar fell broadly on Wednesday, hitting a 2 1/2-month low against the euro and closing in on a 13-year trough versus the yen after the Federal Reserve slashed interest rates to between zero and 0.25 percent.

The euro climbed as high as $1.4192 according to electronic trading platform EBS in Asian trade, after the Fed said it would use "all available tools" to battle recession after cutting the fed funds rate from 1.0 percent to a record low.

It added that it was mulling possible purchases of longer-term U.S. Treasury debt and would consider other ways to tap its burgeoning balance sheet to stimulate the flagging economy. [ID:nN16593807].

The announcement and statement hastened broad selling in the dollar, helping the euro register a staggering 11 percent gain on the month to date.

"The Fed had an explicit commitment that they will leave interest rates very low for an extended period and that's quite negative for the dollar because of relative interest rates," said Adarsh Sinha, currency strategist at Barclays Capital in London.

"I guess the question now is: is this the beginning of a big move for the dollar, say euro/dollar to $1.60?"

By 1225 GMT, the dollar had fallen 0.3 percent on the day to 88.70 yen , hovering close to a 13-year low of 88.10 yen hit on trading platform EBS last week.

The euro dipped to $1.4065 , but stayed in sight of an earlier two-and-a-half month high of $1.4192 hit on EBS during Asian trade. The dollar fell 0.2 percent against a basket of six major currencies to 80.022 .DXY.

Yen gains versus the U.S. currency helped to push the euro down 0.5 percent to 124.75 yen .

Sterling faced pressure as the argument for more aggressive British interest rate cuts became compelling, with euro/sterling hitting a record high at 92.06 pence . For latest report click on [GBP/].

FOCUS ON BOJ, MOF

The yen has rocketed in recent months as investors unwound carry trades, cutting exposure to riskier and higher-yielding assets as the financial crisis mushroomed.

It rose again as the Fed's move brought U.S. interest rates below the Bank of Japan's target for the overnight call rate -- now at 0.30 percent -- for the first time in well over a decade.

This has increased speculation that the BoJ will cut interest rates to almost zero following its two-day meeting which ends on Friday.

Analysts say Japan's central bank may also follow the Fed into buying commercial paper outright or purchasing asset-backed securities. [ID:nPEK196415].

"With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen," Bank of America G10 currency strategist David Powell said.

"It also increases the possibility that the BoJ will cut rates by 20 basis points on Friday," he added.

Two-thirds of analysts polled by Reuters now expect the BoJ to cut rates this week, and most of them see rates falling to 0.1 percent from the current 0.3 percent. [ID:nT238594].

The yen's gains prompted Naoyuki Shinohara, Japan's top financial diplomat, to declare on Wednesday that rapid movements in currency markets are undesirable [ID:nTKU003256].

Market players say they remain wary about the risk of Japan intervening to rein in the yen's climb, which is hurting the nation's exporters.

(Additional reporting by Jessica Mortimer in London)

(Reporting by Veronica Brown; Editing by Patrick Graham)

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FOREX-Dollar hits 13-1/2 year low vs yen, falls vs euro

* Dollar hits 2-1/2 month low vs euro a day after Fed move

* Dollar plunges to 13-1/2 year trough vs yen below 88

* Fed's historic rate cut seen keeping dollar weak

* BoJ seen cutting rates later in the week

(Adds quotes, updates prices)

By Wanfeng Zhou

NEW YORK, Dec 17 (Reuters) - The U.S. dollar tumbled on Wednesday, hitting its lowest in more than 13 years versus the yen and also falling against the euro, a day after the Federal Reserve slashed interest rates to the lowest among major economies.

The dollar's plunge against the yen was stoking speculation that Japanese authorities may intervene to rein in the yen's climb, which is hurting the nation's exporters.

The Fed on Tuesday cut its federal funds rate target to a record low, setting a range of zero to 0.25 percent compared with the previous level of 1.0 percent, and said it would use "all available tools" to battle recession. See [ID:nN16593807].

"The underlying story in the FX market remains yield. The fact that the Fed made this major policy move yesterday really changed the balance of power towards the euro for the time being," said Boris Schlossberg, director of currency research at GFT Forex in New York.

The massive cut further diminished the greenback's yield appeal against the euro, which has registered a staggering 11 percent gain so far during the month.

"The dollar effectively could be the new carry trade (currency), although in an environment where virtually everybody is converging towards zero interest rates, the carry trade is now holding much less power than it used to, with the exception of the very few high-yielding currencies that are out there," Schlossberg said.

In early trading in New York, the euro rose to a new two-and-a-half month high at $1.4436, according to Reuters data. It was last up 0.9 percent at $1.4384 , The euro may test the $1.45 level before year-end, Schlossberg said.

Against the yen, the dollar fell to 87.15 yen , the lowest since mid-1995. It was last down 1 percent at 88.05.

Sterling faced pressure as the argument for more aggressive British interest rate cuts became compelling, with euro/sterling hitting a record high at 92.32 pence . For latest report click on [GBP/].

Against the dollar, the pound last traded down 1.2 percent at $1.5411 .

FOCUS ON BOJ, MOF

The yen has rocketed in recent months as investors unwound carry trades, cutting exposure to riskier and higher-yielding assets as the financial crisis mushroomed. The dollar has lost more than 8 percent versus the yen this month.

The yen rose again as the Fed's move brought U.S. interest rates below the Bank of Japan's target for the overnight call rate -- now at 0.30 percent -- for the first time in well over a decade.

"With rates in Japan now higher than Fed rates, this puts further downward pressure on dollar/yen," Bank of America G10 currency strategist David Powell said.

"It also increases the possibility that the BoJ will cut rates by 20 basis points on Friday," he added.

The BoJ starts its two-day monetary policy meeting on Thursday. Two-thirds of analysts polled by Reuters now expect the BoJ to cut rates this week, and most of them see rates falling to 0.1 percent from the current 0.3 percent. See [ID:nT238594].

The yen's gains prompted Naoyuki Shinohara, Japan's top financial diplomat, to declare on Wednesday that rapid movements in currency markets are undesirable [ID:nTKU003256].

In Norway, the central bank cut interest rates by 175 basis points on Wednesday to 3.0 percent. The Norwegian crown fell, pushing the euro down 0.2 percent to 9.5759 . (Additional reporting by Veronica Brown in London; Editing by Chizu Nomiyama)

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Forex Money Management and Placing Stops Correctly for Bigger Profits

Risk and Trading.

Most traders try so hard to restrict risk they actually create it. A great example of this is forex day trading where you have tight stops by predicting the daily range.

Te problem is all movements within a day are random and the apparent small risk is a guaranteed lose as volatility is random and takes them out.

There is a big industry in telling you that forex can be traded safely – Rubbish! It’s risky and if you don’t like taking calculated risks put your money in a high interest account.

To make big returns, you have to take risk that’s simply the reality of trading.

Placing Stops

Place stops behind heavy valid resistance or support – that means if they trade recoils back you may be out but your stop is in a online courses from area. Another point to keep in mind is to use a stop close ( I use New York stock exchange times ) this means that you have more chance of winning it may look more risky but longer term its not.

How often do you see stops picked off in the day session for the market to settle back the way you thought? It happens often so don’t do what the majority do run a stop close if you can keep an eye on the market.

Moving stops

Beware of moving stops to closely – if you try and lock into quickly you will get taken out by normal volatility. Hold your stop back and make sure you have the discipline to take dips in open equity and keep online courses from eye on the bigger prize. Accept that you’re never going to sell the top and buy the bottom, but if you get 70% of the big trends you will pile up profits.

Be selective

Only trade those trades that have high odds chance of winning forget trading frequently you don’t get paid for that you get paid for being RIGHT and that’s all.

If you are selective you can risk more on these trades and give yourself a bigger chance of winning. Never fall for the risk reward of trade is your profit target, your stop – its NOT.

This is just your view and bears no relation to the trade’s outcome.

Don’t Diversify

If you have a big account fair enough but if you have a small account diversification simply dilutes your profit potential and ensures you make mediocre gains. On a small account load the trade and risk as much as you can.

Be realistic

There is a big difference between taking calculated risks and being rash. Do not over leverage your trades. Keep in mind the best traders in the world make 100% and if you made that to then you would compound a lot of money over time. Don’t go for broke and get blown out.

Money management and stop loss placement is all about trading the high odds trades at the right time, placing stops and trailing them logically not to get taken out by volatility and loading the trades with the best potential.

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FOREX-US dollar hits 2-1/2-month low vs euro before Fed

* Dollar at 2.5-month low vs euro before Fed's rate move

* U.S. housing starts, permits, consumer prices plunge

* Fed seen cutting rates by at least 50 bps from 1 pct

* Fed may offer clues on plans for quantitative easing (Adds quotes, updates prices)

By Wanfeng Zhou

NEW YORK, Dec 16 (Reuters) - The U.S. dollar fell to a two-and-a-half-month low against the euro on Tuesday after more bad news from the housing sector and a record decline in consumer prices added to speculation that U.S. interest rates will fall closer to zero.

The Federal Reserve is widely expected to cut interest rates by at least 50 basis points from the current 1 percent at the end of its policy meeting later on Tuesday. The interest-rate futures market are also showing about a 64 percent chance the Fed could slash rates by 75 basis points. See [ID:nN162765].

"The record declines in U.S. inflation and housing data will prompt the Fed to cut one final time this afternoon before engaging in a campaign of 'quantitative easing' in the new year," said Michael Woolfolk, senior currency strategist at The Bank of New York Mellon in New York.

"While the market expects a 50-basis-point cut, the Fed may deliver the larger whisper number of 75 basis points to punctuate the end to the rate-cut cycle," he said. "Both developments are expected to be U.S. dollar negative."

In midday trading in New York, the euro was up 0.8 percent on the day against the dollar at $1.3824 after hitting a high of $1.3842, the highest level since early October. The euro had earlier come under pressure after purchasing managers' surveys painted a bleak outlook for the region's economy.

George Davis, senior currency strategist at RBC Capital Markets in Toronto, said the euro's break of its 100-day moving average around $1.3775 brought in new buyers.

"Now that we've chiseled above that level, you see the momentum players coming in and bidding the euro higher," he said.

YEN NEAR 13-YEAR HIGH

The ICE futures U.S. dollar index .DXY, which tracks the value of the greenback against a basket of six currencies, fell 0.8 percent to 81.473, after falling as low as 81.395, the worst level since mid-October.

The dollar fell below 90 yen as investors cut their exposure to risk after Goldman Sachs (GS.N) posted its first loss as a public company.

The yen's rise to near a 13-year high increased speculation that Japan may intervene to stem the currency's strength, which threatens the competitiveness of its exports.

The dollar fell 0.9 percent to 89.89 , after dropping to session lows at 89.73, near a 13-year low of 88.10 yen reached last week.

UNORTHODOX FED

With the U.S. central bank almost at the end of its rate-cutting cycle, investors will scrutinize the Federal Open Market Committee statement for clues about its intention to undertake aggressive unconventional policy measures to restore growth.

U.S. data released on Tuesday showed new housing starts and permits plunged to record lows in November, while consumer prices dropped at a record rate for a second straight month. See [ID:nN16549579]. [ID:nN15516550].

Analysts said the very soft readings on inflation and continued deterioration in the housing sector support views of a very expansionary policy stance.

"The interest-rate cut may be something of a sideshow, however -- market participants will likely be more focused on further hints of non-conventional easing, or a commitment for policy to remain expansionary for an extended period of time," Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York, wrote in a note.

"A shift to a non-conventional policy approach at today's announcement is not widely expected, and thus the initial reaction would likely be dollar negative." (Additional reporting by Steven C. Johnson; Editing by Jan Paschal)

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Forex bureaus lose millions in banker’s cheque fraud

December 17, 2008: Kenyans transacting their business using bankers’ cheques have a reason to worry.

A gang of fraudsters have invaded the national payment system with fake cheques, soiling the integrity of what has been the only trusted instrument of cashless transactions in the country.

The Central Bank of Kenya (CBK) says operators of forex bureaus have paid millions of shillings to fraudsters in exchange for worthless pieces of paper.

The fraudsters have pocketed “colossal” amounts of money by presenting fake bankers cheques to operators of foreign exchange bureaus, according to Ms Rose Detho, the CBK director in charge of banking supervision, in a circular issued last week.

It is the latest blow to a payment system that has remained largely dependent on cash due to frequent slip-ups in cashless transactions. Rampant forgery has limited the use of personal cheques in business transactions locking Kenyans to cash and — until now, banker’s cheques.

In this latest case, fraudsters pretend to be in need of foreign currency but present the fake cheques late in the evening when it is not possible to ascertain their authenticity with the issuing banks.

The recipients part with huge amounts of money only to realise the next morning that they had been left holding worthless papers.

“The Central Bank has received reports from a number of foreign exchange bureaus that have recently fallen victim to fraud and lost colossal amounts of money,” says Ms Detho, in a warning, which though handy for business people, raises pertinent questions over the integrity of a payment system that is riddled with the twin problem of fake currency as well as fraudulent instruments of payment.

Cheques are Kenya’s most widely used means of payment after cash, accounting for more than 80 per cent of total non-cash transactions last year. This is mainly because the banking system has been slow in adopting plastic money and electronic fund transfers.

The CBK annual report shows that in the financial year to June 2007, the daily volume of cheques settled through the central clearing house averaged 46,833 valued at Sh8.51 billion.

Since they are issued by banks and bear the issuing bank’s logo and standard security features, bankers’ cheques are held as a secure mode of payment, almost as acceptable as cash.

The CBK supervises the printing and fitting of security features by authorised printers of cheques, while banks verify availability of funds in the drawer’s account before issuing the cheques.

Most institutions as a result readily accept bankers’ cheques without confirmation with the issuing banks but Ms Detho now warns that it has become necessary to do so.

Bankers’ cheques, just like personal cheques, have to go through the three-day clearing process — causing undue delay in the payment system.

“This circular is issued as an alert that recipients of bankers’ cheques are exposed to fraudsters on the loose. All bureaus are advised to exercise due care and caution by embracing the ‘know your customer’ procedure,” says Ms Detho.

Most forex bureau operators who spoke to Business Daily say that the problem cuts beyond the fraudulent cheques, as most are also confronted with fake currency on a daily basis.

Central Bank of Kenya

“We only insist on cash,” said Mr Dennis Kilonzo, the principal officer at Village Market Forex Bureau. “We don’t accept cheques from strangers.”

Mr Kilonzo said his firm was yet to be hit by the latest wave of fake bankers’ cheques, but admitted that con-artists had infiltrated the foreign exchange to an alarming extent.

An employee at Karen Forex Bureau also said that though bankers’ cheques are supposed to be a secure form of payment there is no longer a guarantee as to their authenticity.

Another employee at Capital Bureau De Change, who also requested anonymity, said fraud in various forms such as fake currency and cheques was a daily occurrence in the business.

Fraudsters continue to undermine the integrity of the payment system despite the tightening of laws that have even criminalised the issuance of bouncing cheques.

Early this year, the banking industry admitted it was grappling with a credibility crisis occasioned by an alarmingly high tally of bounced cheques.

Fraudulent cheques from investors and some stockbrokers threatened to stall allocation of shares in the Safaricom IPO mid this year. Receiving banks for the initial public offering (IPO) reported sorting out fraudulent applications valued at over Sh96 million.

The fraudsters were hoping to get share allocations using either fake printed deposit slips, which they handed in to unsuspecting stockbrokers or fake bankers’ cheques drawn for the Safaricom IPO.

Statistics collected between January and September last year in a first ever survey by the Kenya Bankers Association (KBA) showed that at least 34 of the 41 licensed commercial banks reported incidents of bouncing cheques, with the total value in the nine months estimated at over Sh2.2 billion.

The survey showed that Kenyans cut 148,211 bad cheques within the period. The problem cuts across the board as big and small banks appeared to suffer equally, with the biggest victims being Co-operative Bank, which reported 35,210 dishonoured cheques, KCB 19,064 and Equity Bank 18,886.

KBA chief executive John Wanyela told said early this year the rising prevalence of bouncing cheques had prompted industry players to take action hoping to make cheques a credible and widely acceptable means of payment.

“The government spends billions of shillings minting new currency each year while companies pay similar amounts to cash in transit companies to transport cash,” said Mr Wanyela.

Central Bank’s anti-fraud unit, which is meant to reign in the fraudsters, is however hampered by institutional and capacity constraints.

“The CBK Banking Fraud Investigations Department is already overwhelmed by the number of fraud cases they are currently handling,” said Mr Wanyela.

A city based advocate with Harrison Hamilton and Mathews, Mr Richard Omwela, called on the police to crack down on the fraudsters as a deterrent to safeguard the integrity of the entire payment system.

“The police need to clean up this mess as it goes to the core of our payment system, what means of payment should we trust if not bankers’ cheques?,” he poses, adding that it was possible that some forex bureau operators with insurance policy covers against fraud could be operating in cahoots with the fraudsters to rip-off their insurers.

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