In view of the UK’s lowest exchange rate against the Euro this week and a plummeting exchange against the US dollar aswell, I wondered who dictates their settings and why can’t they be higher to give us Brits a better deal when we’re going abroad?
No individual or single organisation controls the exchange rate.
They are set by market forces, i.e. the buying and selling between banks, brokers etc.
If there is a lack of confidence in a countries economy then the value of the currency will drop. If there is confidence and the economy is strong then the price will rise.
Sterling is dropping against all currencies because the market experts do not have confidence in the economy and the plans that Brown and Darling have pushed to asisst.
"I’m caught in a trap
I can’t walk out
because I love you too much Baby"
Beijing is caught in ‘trap’ over dollar
By Jamil Anderlini in Beijing
Published: May 25 2009 03:00 | Last updated: May 25 2009 03:00
China’s official foreign exchange manager is still buying record amounts of US government bonds, despite Beijing’s increasingly vocal fear of a dollar collapse, according to officials and analysts.
In recent months, senior Chinese officials, including Premier Wen Jiabao, have repeatedly signalled their concern that US policies could lead to a collapse in the dollar and global inflation.
But Chinese and western officials in Beijing say China is caught in a "dollar trap" and has little choice but to keep pouring the bulk of its growing reserves into the US Treasury, which remains the only market big enough and liquid enough to support its huge purchases.
In March alone, China’s direct holdings of US Treasury securities rose by $23.7bn (£14.9bn) to reach a new record high of $768bn, according to preliminary US data, allowing China to retain its title as the biggest creditor of the US government.
"Because of the sheer size of its reserves Safe [China's State Administration of Foreign Exchange] will immediately disrupt any other market it tries to shift into in a big way and could also collapse the value of its existing reserves if it sold too many dollars," said a western official, who spoke on condition of anonymity.
The composition of China’s reserves is a state secret but dollar assets are estimated to comprise as much as 70 per cent of the $1,953bn total. China owns nearly a quarter of the US debt held by foreigners, according to US Treasury data.
The collapse of Fannie Mae and Freddie Mac, the US mortgage financiers, last summer prompted Safe to adjust its strategy and buy far more short-term US government securities, instead of longer-maturity bonds and notes.
But Safe has not fundamentally changed its strategy of allocating the bulk of its burgeoning foreign exchange reserves to US Treasury securities, a western adviser familiar with Safe thinking told the Financial Times.
He said Safe traders were "very negative" on sterling because of expectations of renewed weakness of the UK currency, but Safe was neutral on the euro and bullish on the Australian dollar.
The pound ended last week at its strongest since December, shrugging off a warning over the UK’s soaring public debt from ratings agency Standard & Poor’s.
The US dollar fell to its lowest level of the year against major currencies last week. Treasury yields spiked to six-month highs as investors focused on the willingness of creditors to fund a deficit that was expected to be about 13 per cent of GDP this year.
China’s buying of US debt helps Washington fund its soaring deficit and there is no indication that Beijing will shy away from purchases, the Obama administration’s budget chief said last week.
> How much does this effect our (U.S.) ability to pressure China on the North Korean nuclear program?
http://www.ft.com/cms/s/0/cb2e1262-48c3-11de-8870-00144feabdc0.html?nclick_check=1
Thanks Hilbilly, there’s one in every crowd lol.
Lakota - I hear ya. What a mess huh. 2010 is our D-Day to start turning this around. McCain wasn’t at the bottom of my list. He wasn’t even on my list.
Thanks for cheering me up Ol’ Foolosifer. Ha!
Here ya go Christine - KJI as Elvis
http://www.freakingnews.com/Kim-Jong-Elvis-Pics-1919.asp
What you have enlisted above is the classic catch 22. Your damned if
you do and damned if you don’t. We really can’t allow China to continue
to buy the bond structure they are. We get weaker and weaker each
time they do. Obama in his never ending quest to break us financially
has put us in a very dangerous position. We couldn’t leverage China
in a fortune cookie contest, However they could leverage us. And they
are doing so right now.
Obama was not the right choice for the times we are in, The left knew
it, and we certainly on the right knew it. McCain was a horrible choice.
Now we need immediate action to over ride Obama and his intentions
to collapse our way of life.
Currently at the time of writing I am 18 years of age and I have been practicing stock, commodity and currency trading in several different practice accounts. What I have discovered is that I am best at currency trading and I make the most money out of trading that way. With stocks and commodities I have had moderate successes but I’m better at FX trading than anything else and I’ve learned a lot too.
I also know that currency tends to trend long term such as a few months to a few years which is where currency options are best suited. Spot-forex trading on the other hand is traded on margin and is best suited to short term trading of the FX markets.
I have only had practice trading FX in spot-forex and spread betting, both of which had a return of several hundred percent. What I would like to know is what is the best way to trade forex out of currency options, spread betting or spot FX, and which is best suited to a UK resident to gain wealth? Please help/advise. Thanks.
P.S. Sorry its so long.
The answer is really very simple. if you are in the UK you should go through the spread betting route because all gains are tax free. All the instruments you have mentioned are traded on margin so are equally risky but the difference is that if you trade spot forex or currency options you will have to pay tax on your gains!
I am 18 years old and I have been practicing spot-forex trading for several months now with FX Club and I am quite good at it and have learned a lot about currency trading from my demo account and some books and internet article sites on currency & options trading. Its become my passion actually.
I also know something that actually is a secret to FX trading success; the trends are usually long term, lasting from several months to several years meaning you are best to trade for the long term on currency pairs to enjoy the ride of making money. You can’t do this with spot-FX because you are trading on margin and if a trading position is left open too long, you will be wiped out within so long.
What I would like to know is if currency options trading is a good way to trade currency by simple vanilla call & put options as I know that spot-FX is essentially a mugs game? Also is there anybody out there who trades currency options for a living at all? Also, what is an easy to use currency options trading brokerage that can be used by a UK based investor? Please help advise. Thanks.
P.S. Sorry my question is too long.
if you want to trade forex, you need to trade futures. if you don’t have enough money you need to save the money while doing something else while learning more about forex and then trade futures. once you are able to trade futures you could add options on futures if you wanted but you do not need to do that. generally speaking successful option trading is more difficult than than trading futures or stocks. options are never simple vanilla.
I have an interest in trading forex as I’m quite good at it. I have tried out easy-forex but don’t like their spreads as they are too wide, I have been practicing using FX Club and have made as much as 500%+ return in a month, but I’m not sure. I have even tried practicing spread betting forex and have made as much as 400%+.
I want to know if there is a better forex broker out there that is a good forex broker that lets you take advantage of up to date news, charts and is easy to use, doesn’t have spreads and charges commisions only. Also one thast can be used by a UK resident. All help would be much appreciated thanks.
Dude stay away,
you can lose 80% in one day just as easily.
please can you advise if i make forex spread betting my only job do i have to disclose it as income in my uk tax return, as currently it is deemed not liable to tax as it is betting income, however, does this rule change if it is my only income
Spreadbetting has two major bits of government legislation. One states that winnings are not liable to capital gains tax and the other is that spreadbetting is regulated by the FSA. There is no parliamentary legislation that refers to income tax on spreadbetting wins. So you pay no capital gains on spreadbet profits - end of story.
Income tax: All income should be declared for taxation assessment. It is not for you the individual to decide if tax is due to be paid or not. That is the job for the tax man. Some income may be exempt from tax, in which case your tax form will have sections where you claim exemptions such as allowances, pension contributions etc. There are a few other exemptions that are not made public on the tax forms and one of those is Gambling winnings. Winnings from gambling are tax exempt under most (but not all) circumstances. So it comes down to criteria for determining who is and who is not exempt.
HMRC refers to ‘trade’ as running a business - not to be confused with trading/investing. A professional gambler is deemed to someone whose gambling is considered by HMRC to be a trade(business). Businesses are not able to exempt themselves fron tax on gambling income. If you do any business activity producing income that is associated with gambling (spreadbetting) you could be liable for income tax on your gambling winnings. If you have a regular income from a source not associated with gambling such as a self employment, PAYE or a pension you cannot be classified as a professional gambler and so will not be liable to pay tax on winnings. It is irrelevant how much you win or how expert you are. HMRC are very reluctant to classify anyone as a professional gambler and it their decision alone - not yours.
I would like to know whether I would simply report my gains on my US federal tax return or would I have to file a tax return with the UK. Also am I subject to any special levies or fees from the UK for having my account there.
There are tax treaties between the US and UK intended to avoid double taxation. If you are in the US you would be responsible for paying US taxes. It’s best to consult with a knowledgeable tax advisor. Robert Green of Green Trader Tax gives more detailed answers about this on the DailyFX forums http://forexforums.dailyfx.com/forex-tax/ and he will always be giving some live webinars to explain more.