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Inside the Currency Market: Mechanics, Valuation, and Strategies

Book Description

A complete resource to trading today's currency market

Currency movements are impacted by a variety of factors, including interest rates, trade balances, inflation levels, monetary and fiscal policies, and the political climate. Traders use both fundamental data and a variety of technical tools to trade within this market. Inside the Currency Market describes both the underlying dynamics that drive this market and the strategies that can help you capture consistent profits in it.

Page by page, this reliable guide skillfully discusses the structure of the market, its roles in the global economy, the forces that drive currency values, trading strategies, and tactics. It also offers a detailed understanding of how global financial flows, derivatives, and other markets such as oil and gold impact currencies. Along the way, author and professor Brian Twomey provides information on gathering and analyzing global financial data so that traders can gain a "big-picture" perspective when attempting to identify trades.

  • Explains virtually every element of the market and can function as a desk reference that puts everyday events into context for traders

  • Fundamentally driven trades based on interest rate differentials and trade imbalances are discussed, as well as technical trades involving chart patterns, trends, and trading ranges

  • Each chapter contains questions and answers to help readers master the material

The currency market continues to generate interest and attract new retail traders due to the many opportunities available within it. This book will show you how to successfully operate within this arena by making the most informed trading decisions possible.

Table of Contents

  1. Cover Page
  2. Title Page
  3. Copyright
  4. Dedication
  5. Contents
  6. Foreword
  7. Preface
  8. Acknowledgments
  9. CHAPTER 1: Foreign Exchange Reports
    1. Bank of International Settlements
    2. Triennial Survey
    3. Conclusion
  10. CHAPTER 2: Currency Trading Beyond the Basics
    1. Pips and Lots
    2. Bid/Askā€”The Difference Is in the Spread!
    3. Punishing the United States with Margins
    4. Mrs. Wantanabe and the Margin Japan
    5. Margin: Europe, Switzerland, England, Australia, Hong Kong, and Canada
    6. Rollovers
    7. Rollover Rates and LIBOR
    8. Swap Points and Rollover
    9. Currency Fixing
    10. Factor Swap Points
    11. Day-Count Convention
    12. Triple Rollover
    13. Trade Strategy
    14. Swap Points versus Rollovers for World Wide Traders
    15. National Futures Association and Currencies
    16. Orders: Europe, Australia, New Zealand, Hong Kong, Japan, Switzerland, Canada, and England
    17. Brokers: Yesterday and Today
    18. Exchange Rates: The Impact of Keynes and Mundell-Fleming
    19. U.S. Current and Capital Account
    20. Purchasing Power Parity
    21. OECD-Eurostat PPP Program
    22. Conclusion
  11. CHAPTER 3: Exchange Rates and Trade Weight Indices
    1. Trade-Weight Methodology
    2. IMF Price Indexes and History
    3. Sweden
    4. Canada
    5. Switzerland
    6. Euro
    7. United States
    8. USDX
    9. U.S. Major and Broad Index
    10. CME Dollar
    11. International Monetary Fund: Role and Function in Trade
    12. Exchange Rate Pass Through and the U.S. Dollar
    13. Indicative versus Reference Rates
    14. Factor Exchange Rates
    15. Trade Weight Indices and Spot Trades
    16. Conclusion
  12. CHAPTER 4: Short-Term Interest Rates and Money Market Instruments
    1. Repurchase Agreements
    2. Repo-Market Definition
    3. Repo Rates and Repo Interest
    4. Types of Repo Transactions and Spot-Currency Trades
    5. U.S. Repo Market
    6. Bilateral Repo Trade
    7. Tri-Party Repo Infrastructure Reform and White Paper by New York Federal Reserve Bank
    8. Treasury Market Practices Group and U.S. Fails Charges
    9. Japanese Repo Market
    10. Spot Currency and Japanese Repo Rates
    11. New Zealand
    12. European Repo Council
    13. Implications of Survey and Spot Currency
    14. Switzerland
    15. Swiss Repo and Spot Currency
    16. Eurex Zurich Clearing
    17. Great Britain
    18. Canada
    19. Europe
    20. Australia
    21. Repo Rates and Spot Currencies
    22. Eurepo Charts
    23. Intercapital
    24. Dollar Repos or Swap Lines
    25. Chiang Mai Initiative Multilateralization
    26. Conclusion
  13. CHAPTER 5: LIBOR
    1. Sonia and Euronia Indices
    2. SONIA, LIBOR, and British Pound Sterling/U.S. Dollar
    3. Seasonality and British Pound Sterling/U.S. Dollar
    4. BBA and LIBOR
    5. Seasonal Spot Currencies and LIBOR
    6. Maintenance Periods
    7. EURIBOR
    8. EONIA
    9. Track EURIBOR and EONIA Rates
    10. Euro, EURIBOR, and EONIA
    11. Australia and New Zealand
    12. Australian Dollar/New Zealand Dollar and Bank Bills
    13. Australian Securities Exchange
    14. Seasonality and Australian Dollar/U.S. Dollar, New Zealand Dollar/U.S. Dollar
    15. U.S. Dollar Pairs and LIBOR
    16. TIBOR and EUROYEN
    17. Repatriation and the Yen
    18. EUROYEN
    19. Euronext and EUROYEN
    20. Euro/Japanese Yen as a Risk Indicator
    21. Seasonality and U.S. Dollar/Japanese Yen
    22. Canada
    23. Seasonality and U.S. Dollar/Canadian Dollar
    24. Switzerland
    25. Seasonality and U.S. Dollar/Swiss Franc
    26. Target Rates Defined
    27. Conclusion
  14. CHAPTER 6: Government Bonds, Yields, Yield Curves, and Currency Prices
    1. Yield Curves
    2. Currency Trading and Yield Curves
    3. Central Banks and Yield Curves
    4. Bonds and Yields
    5. Euro/U.S. Dollar and U.S. Treasury Bond Yields
    6. British Pound/U.S. Dollar and Bond Yields
    7. U.S. Dollar/Swiss Franc, U.S. Dollar/Canadian Dollar, U.S. Dollar/Japanese Yen and Bond Yields
    8. Carry Trades and Bond Yields
    9. U.S. Treasury Yield Curves and 2- and 10-Year Notes
    10. U.S. Dollar/Swiss Franc, U.S. Dollar/Japanese Yen, and U.S. Dollar/Canadian Dollar
    11. Canada Yield Curve and Bond Issuance
    12. Calculate Canada Bonds and Yields
    13. Yield Curve and U.S. Dollar/Canadian Dollar
    14. Australian Dollar/U.S. Dollar and New Zealand Dollar/U.S. Dollar
    15. British Pound Yield Curve
    16. Gilt Issuance
    17. British Pound/U.S. Dollar
    18. Japanese Yield Curves
    19. Japanese Yield Curve and U.S. Dollar/Japanese Yen
    20. U.S. Dollar/Japanese Yen, Bonds, and Yields
    21. Australia Yield Curve
    22. Factor Australia Yield Curve
    23. Australian Dollar/U.S. Dollar and Australia Yield Curves
    24. Track Australian Dollar/U.S. Dollar
    25. New Zealand
    26. Inflation-Indexed Bonds Factored as a Settlement Price per New Zealand Dollar as Principal
    27. New Zealand Dollar/U.S. Dollar and New Zealand Yield Curves
    28. Track New Zealand Dollar/U.S. Dollar
    29. Australian Dollar/New Zealand Dollar and Yield Curves
    30. Euro Yield Curve
    31. Track the Euro Yield Curve
    32. Euro/British Pound and Yield Curve
    33. Swiss Franc Yield Curve
    34. Swiss Yield Curve
    35. U.S. Dollar/Swiss Franc
    36. U.S. Yield Curve
    37. Dollar Pairs and Yield Curves
    38. Reserve Requirements and Bonds
    39. Cross Pairs, Bonds, and Yields
    40. Trade Strategies
    41. Yield Curves and Currency Prices
    42. Dollar Value of Basis Point and Modified Duration
    43. Conclusion
  15. CHAPTER 7: Swaps and Forwards
    1. EONIA Swap Index
    2. Australia Bank Bills
    3. New Zealand Swap Rate
    4. Trade Swaps against New Zealand Dollar/U.S. Dollar
    5. Japan
    6. Trade Web, LCH Clearnet, and ICAP
    7. United Kingdom and British Pounds
    8. Canada
    9. Swiss Swaps
    10. United States
    11. Outright Forwards
    12. Calculate Forward Points, Yield Curves, and Spot Prices
    13. Conclusion
  16. CHAPTER 8: Stock and Bond Markets
    1. Fair Value
    2. Bonds
    3. Reserve versus Funding Currency Pairs
    4. Globex and the Currency Bond/Yield Interplay
    5. New Zealand
    6. Trade Strategy
    7. Australia ASX
    8. Trade Strategy
    9. FTSE and British Pound
    10. Trade Strategy
    11. Euro/British Pound
    12. Japanese Yen
    13. U.S. Dollar
    14. British Pound/Canadian Dollar
    15. British Pound/Swiss Franc
    16. British Pound
    17. Japanese Nikkei 225 and TOPIX Indices
    18. Trade Strategy
    19. Deutsche Boerse DAX, STOXX, Bunds, and the Euro
    20. German Bunds
    21. Euro Trade Strategy
    22. Euro/Canadian Dollar
    23. Euro/Swiss Franc
    24. SIX Swiss Exchange
    25. SIX Swiss Exchange Trading Services
    26. Trade Strategy
    27. Toronto Stock Exchange
    28. Trade Strategy
    29. New York Stock Exchange
    30. Transportation Index, New Zealand Dollar/U.S. Dollar and Australian Dollar/U.S. Dollar
    31. U.S. Dollar/Swiss Franc and Dow Jones Utility Average
    32. Interest Rates
    33. Conclusion
  17. CHAPTER 9: Currency Cycles, Currency Futures, Options, and Volatility
    1. CME Group Equivalents
    2. E-Micro
    3. Options and Volatility
    4. Volatility and Volatility Indicators
    5. Option Premiums
    6. Barrier Options
    7. Volatility and Value-at-Risk Models
    8. Conclusion
  18. CHAPTER 10: Technical Analysis
    1. Volume and Open Interest
    2. COT Reports
    3. Bollinger Bands
    4. Simple Moving Averages
    5. Ichimoku Kinko Hyo
    6. Baltic Dry Index
    7. IMF and Special Drawing Rights
    8. Pivot Points
    9. Currency Correlations and Trend Lines
    10. Conclusion
  19. Bibliography
  20. About the Author
  21. Index