FOREX-Dollar rises vs yen as trading volume thins
NEW YORK, Dec 18 (Reuters) - The dollar gained on the yen on Tuesday as traders covered their bets against the greenback and began taking profits ahead of year end.
Volumes were thin as investors began closing the books on 2007, leading to jittery trading influenced heavily by technical factors and flows, traders said.
The European Central Bank’s extension of $500 billion in two-week loans to euro-zone banks also helped ease anxiety about a year-end credit squeeze, traders said, prompting some investors to wade back into yen-funded carry trades.
"The ECB provided a bit of systematic relief, and that’s led to some renewal of risk-taking activity," said Robert Fullem, vice president of corporate foreign exchange sales at The Bank of Tokyo-Mitsubishi-UFJ in New York.
"But it is a very thin market out there, and the few orders that are out there are keeping currencies in ranges," he said.
Investors have long borrowed yen at low Japanese rates to fund purchases of higher-yielding currencies and assets. As a result, the yen’s fortunes wax and wane in inverse proportion to market risk appetite.
Late afternoon, the dollar was up half a percent at 113.38 yen
The euro traded at $1.4403
Analysts said the ECB’s massive injection bolstered the argument of dollar strength against the euro into year end.
"There is talk that some foreign banks (e.g. U.S. and UK) may have taken in funds as well and at lower rates than they can secure from their respective markets," wrote Win Thin, currency strategist at Brown Brothers Harriman in New York, in a note to clients.
"This may lead to some euro sales as the borrowings are converted and/or hedged. The foreign exchange implications of these money market operations are on the margin, but maybe part of the firmer dollar story that many will overlook," he said.
Investors are also awaiting Wednesday’s results of this week’s liquidity injection plans by top central banks.
The dollar has benefited over the past week from unexpectedly strong U.S. retail sales and inflation data, which fanned speculation that the Federal Reserve may be less aggressive in cutting interest rates next year.
However, the latest Reuters poll still shows a 40 percent chance of a U.S. recession next year.
The Fed is expected to cut its benchmark overnight lending rate twice by 25 basis points to 3.75 percent in the first half of 2008 and leave monetary policy unchanged for the rest of the year, the poll showed. For details, see
Adam Hewison, president of INO.com, an information service for traders in Shady Side, Maryland, said the dollar looks poised to continue rallying in early 2008 after falling sharply against most major currencies this year.
"We have seen a fairly healthy correction here. I think we’re going to see much more two-way trading in the first and second quarters of 2008," he said.
If interest rates stabilize, he said traders will be pushed to cover dollar shorts, setting the euro up for a test of $1.40 and sending the dollar back into the 118-120 yen range in the first half of the year.
"Bears often make the best bulls and they will have to cover their short positions sometime," he said.
Steven C. Johnson reports for Reuters
(Additional reporting by Lucia Mutikani; Editing by Jonathan Oatis)
*Reuters is a registered trademark and belongs to Reuters
Love him or hate him… this trader has guts!
I read a few articles about the gentleman below… perused his book reviews… and thought that I would leave it up to you to decide how you felt about this young investor. Enjoy!
At age 26, it would seem as if Tim Sykes has mastered the market. Using a $12,415 Bar Mitzvah gift, Sykes played the stock market turning the present into a fully audited pre-tax sum of $1.65 million within 3 years. What was originally a hobby turned a profit of over 135 times his investment. Skyes was still in college at Tulane University studying business and psychology when he announced his impressive portfolio profit.
The young investor is also the author of “An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created A Hedge Fund.” Published by his own company, Bullship Press, the book was released October 1, 2007. Sykes attempts to spread the knowledge of hedge funds as simple investment vehicles
for the general population.
In 2003 Sykes founded the hedge fund, Cilantro Fund Management, LLC. In 2006, “Sykes fund was ranked the #1 Short-Bias Fund by Barclay’s for 2003-2006.” Sykes was also honored in a list of the top 30 investment professionals under 30 by Trader’s Monthly. Since his success was publicized, Sykes has seen an overwhelming media exposure and has been in the spotlight on CNN, Fox News, Business Week, CNBC, and various financial cable shows. Critics have said that he is overly-publicized, saying his skills as a trader do not hold a candle next to other hedge fund managers who are rarely heard from.
Sykes encountered tremendous loss in his investments this year. When Cilantro Fund Management closed on October 1, 2007, it had lost 1/3 of its value. Many critics suggested that Sykes’ young age and lack of experience were in direct correlation with the hedge fund’s movement. However, Sykes knows that his overconfidence was to blame. He intends to use this painful lesson as another tool on his trading belt and prove to the trading community that he has the investing skills needed to replicate his previous success.
Sykes claims that he can repeat his 12K to 1.6M feat. “I am calling this challenge “TIM” (Transparent Investment Management), but I am not taking on investors. None. Zero Investors. This is all about me teaching people through my personal stock trading,” said Sykes. His website http://www.timothysykes.com will post details of his trades,it will NOT give trade recommendations in advanced. He vows not to old anything back, allowing site visitors to compliment or criticize his every move. He will also use an online discount broker to prove that anyone is capable of success in the stock market. He has met tremendous resistance from fellow traders… was sitting on the hot seat and now suggests everyone watch him sweat as he tries to replicated a previous profit (see DealBreakers).
This young speculator is trying to prove his investing talents to the world. It will be fun to watch his moves online and see if he can actually match his previous success. This young investor has guts! Regardless if you love him or hate him…you have to admit that it takes courage to put yourself out on the line.
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