Читать книгу The Foreign Exchange Matrix - Barbara Rockefeller - Страница 9

Many economists and financial professionals view the foreign exchange market as the pinnacle of sophistication. FX rates embody all the important Big Picture Macro developments of the day as well as the hidden undercurrents of the international capital markets. The FX market is linked to core economic health, central bank monetary policies, various countries’ fiscal conditions, and trends in stocks and commodities. FX is the glamorous top of the heap.

And yet the professional bank traders who actually move the market minute by minute and day by day are like any other traders. They rarely have PhDs in international economics and finance. They are not paid to have analytically correct opinions. Their sole job is to make a speculative profit for the employer, literally out of thin air. It is thin air they are trading with because banks, hedge funds and other big players do not allocate actual cash or collateral to trade FX – it’s all done on credit lines. Professional FX traders can be viewed as the biggest speculators on the planet, with the primary currency traders at each of the big banks, sovereign risk funds and hedge funds having a credit line stake of hundreds of millions of dollars.

So which is it, pinnacle of high finance or grubby profit-seeking? It’s both. How, then, do we get FX prices that reflect all those high-level economic factors and links to governments and other markets? Well, we don’t. The reflection is like that in a fun-house mirror. Currencies do not equilibrate disparate conditions and imbalances, as economists theorise they should. Imbalances persist not for brief periods, but for decades. We see big exceptions to seemingly classic and timeless rules, like capital following the highest real rate of return and exiting a currency when returns fall. This is just one of the many strange and seemingly contradictory characteristics of the FX market that we seek to explain in this book.

Our goal is to describe how the FX market works in practice and to demystify as many of these puzzles as we can. Together we have about 50 years of experience in the FX market as big-bank spot desk dealer, big bank corporate FX trader, market economist, technical analyst, risk manager, and wire service reporter/financial advisor. Between us, we know or have heard of just about everything, and are equipped to verify or to debunk much of it.

Our purpose, however, is not to present a primer on FX. We assume that the reader already has a high level of knowledge about financial markets generally and a particular curiosity about the FX market. We can’t puncture every misleading or inaccurate idea about FX that has been published as fact in the past decade, but we can offer a perspective that is both true and useful.

To help us do this, we use the overarching concept of risk appetite and its opposite side, risk aversion. Risk appetite is the only explanation that bridges the tangle of contradictory facts and theories about FX. For example, how can a crisis in Europe trigger an already overvalued Japanese yen to become stronger, even in the face of Japanese economic data that dictates the yen should be weaker? The answer lies in risk aversion inspiring Japanese investors to repatriate funds into the safe-haven home currency, the yen. The explanatory value of risk appetite/risk aversion is powerful, and much needed. Before we go further it is important to understand what risk aversion is and how it came to be used in analysis of the FX markets.