The US dollar’s long-term weakness looks set to persist as the currency seems to fall to a fresh historical low against the euro on a weekly basis. The latest G7 meeting, held over the weekend of October 20-21, did nothing to provide any support. In the immediate aftermath of the meeting, the dollar fell to 1.4349 against the euro before bouncing. The reasons for the recovery, at this stage, are not clear.
However, with the dollar fast approaching its all-time synthetic low of around 1.4550, it might well start to attract speculative buying. Another likely reason is that it has got crossed-up and might well derive some support from the fact that it is now also being sold against the yen.
As Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi in London, commented: “Yen buying has intensified after comments at the G7 meeting in Washington indicated that the US authorities have become more concerned over the potential impact of the US housing market collapse.The lack of verbal support for the dollar at the G7 meeting is evident today by the dollar index, which hit a new record low of 77.09.”
Hardman concluded: “The notable lack of support for the dollar is likely to leave market participants with an impression that the US authorities are privately content with a weaker dollar given the support from net exports to overall GDP growth.”
FXCM adds algos
Although it briefly assumed the status of the foreign exchange market’s worst four-letter word, algo is now becoming understood and accepted in the same manner as it is in other asset classes and markets. In these, algorithmic (algo) trading has largely been seen as a method to gain a better level of execution. In FX, however, it has been used as a catch-all term for programme trading, but especially for the aggressive so-called Chicago prop-shops that were able to utilize their technology at the expense of the market’s main liquidity providers.
That is changing and many in the market are predicting that the use of algos will soon become the norm. This is has extended down to the retail sector and Forex Capital Markets has become the latest company to make algo trading programmes available to its clients.
The company says that its new Forex System Selector consists of 40 back-tested models, which can be easily configured to allow its clients to compare several of them at the same time. It says these are aimed at several styles of traders, including those from other assets who might have FX risk they are too busy to manage, those who want to diversify their trading style, or simply as a tool to provide extra risk management.
“Since no single trading system performs well with every currency pair in every kind of market, traders can test each combination of systems and assemble a portfolio that best suits them,” says Drew Niv, the company’s chief executive. “No systems are flawless and there are no miracle solutions in a box that always perform well. Traders should select multiple systems that do well in different markets.”
