Soros Most Successful Currency Trader

George Soros has made billions trading currencies. He is probably most famous for ‘breaking the Bank of England’

in 1992. Mr. Soros is notorious for taking advantage of Forex opportunities. Mr. Soros achieved fame when he took advantage of an astounding Forex opportunity and sold short $10 billion dollars worth of British pounds forcing the Bank of England to withdraw the Pound from the European Exchange Rate Mechanism and to devalue the Pound. He is estimated to have made $1.1 billion from this move.

Soros Says Euro May Not Survive

Obviously when Soros speaks currency markets listen. As a man who knows a Forex opportunity when he sees one his words carry great weight. Recently Mr. Soros Recently Mr. Soros made remarks to the effect that the Euro may not survive the current crisis unless the European Union insists on an international agreement addressing toxic assets. Mr. Soros stated, “One would need a type of agreement on lost capital, so that the burden is shared, and in which every country is part of, otherwise more countries will suffer. The EU should do this. If they don’t do this then the euro may not survive the crisis.”

Markets React to Remarks

Forex markets immediately reacted and the Euro declined against the US dollar and the Japanese Yen limiting any Forex investment opportunities it may have provided. Since Mr. Soros is probably the most successful currency speculators in history his words carry great weight.

Safe Haven Buying

Adding to the pressure on the Euro ECB President Jean-Claude Trichet stated that policy makers could lower the central bank’

s rates further. Dismal US unemployment figures and stock losses sent investors to the safe haven and Forex opportunity that the US dollar and the Japanese Yen provide in troubled markets.

Soros Says Another Great Depression Coming

Mr. Soros has also stated that the US banking system needs $1.5 trillion dollars to be rescued and that the current economic crisis could be worse than the great depression of the 1930’

s. Hopefully he is incorrect on both counts!

Euro in Serious Trouble

Ever since the Euro was launched in 1999 many believed that, in time, the Euro would rival the US dollar for a global reserve currency. The Euro has provided many traders and investors with many Forex opportunities since its inception. The Euro seemed poised to weather the recent economic crisis but recent data from the Euro Zone reveal a currency in trouble.

Euro Zone Economy to Contract

The Euro is faltering as the global economic crisis takes its toll on the currency and the Forex opportunities it provided seem a thing of the past. The economy of the 16-nation Euro Zone is expected to contract by 1.9 percent this year while the US economy is set to shrink by 1.5%. Many economists are expressing doubts about the currency’

s long term prospects. There is even talk of some member states quitting the Euro Zone completely.

Greece May Defualt

The immediate outlook for the Euro Zone is dismal at best. Many member states are in real financial trouble. Many predict a sovereign debt default in Greece which would require an International Monetary Fund style bailout by fellow members with harsh conditions that would jeopardize the country’s fragile political balance. Greece has amassed debts equivalent to 90% of its gross domestic product. All this has had an adverse effect on the forex investment opportunity the Euro once provided.

EU Slow To Address Crisis

The European Union’s response to the global financial crisis has been seen as behind the curve. In contrast to the United States whose Federal Reserve Bank and Treasury Department quickly moved to address the crisis, the EU and the European Central Bank have been seen as sluggish in taking action. EU members have doled out stimulus packages seen as too little too late. The Euro is under extreme pressure on currency markets and at present it’

s potential for Forex opportunities are almost nonexistent.

Economic uncertainties explain the fact that the Euro has a share of foreign-exchange reserves half as large as the US dollar. Investors are attracted to the fact that in the United States a single government agency sets fiscal policy and that U.S. bond markets are much larger and provide investors with more Forex opportunities.

EU Population Stagnant

On unnoticed factor that gives the United States an edge is the fact that the population in the US is expected to rise by at least 20 percent by 2050 while the population in the Euro Zone is stagnating. Holger Schmieding, chief economist for Europe at Bank of America in London stated, “If you have the choice between two similar economies, the one that’s growing faster on trend than the other will have the edge.” If the Euro is to survive and provide Forex opportunities it will need prudent management and more young consumers.

Dollar Perceived As Safe Haven

The US dollar rose on Thursday due to the perception that the dollar is a safe haven in times of economic crisis and has provided Forex opportunities throughout the global financial crisis. The British pound, on the other hand, fell amid news of massive losses by the Bank of Scotland and the perception that the British banking sector is in more trouble than was previously thought.

Treasury Nominee Speaks

The dollar also benefited from a comment by U.S. Treasury Secretary Nominee Timothy Geithner who stated his belief that a strong dollar is in the U.S. interest. Geithner made the remarks to the Senate Finance committee during confirmation hearings. A strong dollar means more Forex opportunities for both traders and investors. Both the house and the senate are expected to approve his appointment as Treasury Secretary.

Dollar Down Against Yen

The dollar was down against the yen after a report showed a larger than expected increase in the number of U.S. workers filing claims for unemployment benefits. The US lost about a million jobs in 2008 and markets reacted to the news that Microsoft will trim 5,000 jobs over the next 18 months and reported that earnings and sales were below expectations.

Yen’s Gains Limited

Gains in the Japanese currency were limited; however, as investors were on alert for possible intervention after Swiss officials issued similar warnings. The Yen is approaching a 13 year high against the Dollar and achieved a 7 year high against the Euro on Wednesday. Traders and investors continue to take advantage of the safe haven and Forex opportunities that the Yen has provided throughout the global economic crisis. Omer Esiner, senior market analyst at Ruesch International stated, “On balance, the dollar is not expected to fall too much because the market has been bracing for dismal news anyway. Bad news out of the euro zone and Japan has benefited the dollar and that should continue despite bad U.S. economic data.”

Credit Downgrades in Euro Zone

The Euro has been damaged by three rating downgrades of euro-zone countries within a week. Standard & Poor’

s downgraded Portugal’s sovereign rating on Wednesday after downgrading Spain and Greece. Despite all the bad news there are always Forex opportunities for those who pay attention and do the necessary research.

If you are familiar with currency markets and the Forex opportunities they provide, you have probably heard the term ‘leverage’

several times. Leverage is a very important part of Forex trading and it is important for would be Forex traders to understand it. Leverage can be a double edged sword leading to impressive profits but also to equally impressive losses.

Leverage is the ratio of the invested amount versus the trade’

s actual value and leverage can help the trader increase Forex opportunities while investing. Forex brokers usually provide their clients with the option to trade with borrowed capital which can greatly increase the value of whatever trades are made.

If a Forex trader is trading with a ratio of 1:100 or X100 that means that for every dollar invested the broker invests $100. If the client invests $100 they will control a trade of $10,000. Obviously this increases the trader’

s Forex opportunities but it also increases the risk involved. Slight fluctuations can cause a trader to either gain significantly or lose very quickly.

Currency fluctuations are measured in pips, which is the smallest change in currency price and could be the second or fourth decimal place of a price depending on the currency pair. This is why it is necessary to trade in large amounts using leverage and increasing the trader’

s Forex opportunities. When dealing with large amounts of currency like $100,000 (a standard lot) minute changes can produce significant profits.

It is wise to use leverage cautiously. Beginners are cautioned against using excessive leverage until a thorough knowledge of how currency markets work and how to take advantage of Forex opportunities when they occur has been achieved.

Forex Markets Volatile in 2008

2008 was an astounding year economically. The year saw the near collapse of the global banking system, stock and commodity markets ran amok, and Forex markets were extremely volatile. The US dollar ended 2008 up 7% despite the state of the US economy. Both the dollar and the Yen continue to offer investors Forex opportunities and safe havens in a time of economic turmoil.

Risk Aversion Props up Dollar

On the final day of trading in 2008 the dollar ended the year up 6.72% as risk aversion continues to prop up the dollar. The bankruptcy of Lehman Brothers, the takeover of Bear Stearns by JPMorgan Chase and Merrill Lynch by Bank of America, sent shock waved through the financial industry. The distress of the financial industry was the result of extreme risk aversion, fear, and interest rate spreads.

Pound and Euro Near Parity

Stock markets have calmed somewhat but Forex markets remain volatile. The Pound and Euro are a near parity as investors anticipated that the European Central Bank would be far slower to cut interest rates than the Bank of England. The Euro lost 4.3% against the Dollar while the Pound lost a staggering 26.5%. It remains to be seen just what Forex opportunities these currencies will offer in 2009.

Yen Strongest Currency

The Yen finished 2008 as the strongest currency but as risk appetite returns may lose some gains. Speculation that the Japanese government would intervene in currency markets turned out to be unfounded. The Yen continues to provide Forex opportunities to investors in 2009.

Dollar and US Treasuries Safe Havens

During the global financial crisis the Dollar and US Treasuries became the safe havens of choice and helped keep the dollar strong against other major currencies. What happens to the dollar in years ahead could very well be determined by what happens in 2009. The US has experienced massive job losses and consumer spending is weak. Hopefully we will see the US economy stabilize as it starts to reap the benefits of Quantitative Easing and President Barack Obama’s fiscal stimulus plan.

Forex markets have never been so volatile but savvy investors and traders will always find Forex opportunity no matter what economic conditions prevail.