The US Dollar made few major directional moves across the majors during the month of April, leading the FXCM Enhanced Dollar Index to show only very mild changes. Nevertheless, the FXCM Enhanced Dollar-Bear Index outperformed holding a short position in the NYBOT’s DXY Index, as the former ended the month up nearly 10 percent while the DXY finished up 3.86 percent.
[B]FXCM Enhanced Dollar-Bear Index – April Performance[/B]
[B]
[/B]
[B]View the Enhanced Dollar-Bear Index’s performance since 2003 here.[/B]
The US Dollar made few major directional moves across the majors during the month of April, leading the FXCM Enhanced Dollar Index to show only very mild changes. Nevertheless, the FXCM Enhanced Dollar-Bear Index outperformed holding a short position in the NYBOT’s DXY Index, as the former ended the month up nearly 10 percent while the DXY finished up 3.86 percent.
[B]Enhanced Dollar-Bear Index – April Performance[/B]
[B]
[/B]
[B]View the Enhanced Dollar-Bull Index’s performance since 2003 here.[/B]
Meanwhile, the lack of price action in the greenback wasn’t beneficial for those aggressively long the US Dollar. Indeed, the FXCM Enhanced Dollar-Bull Index ended the month down 4.76 percent, comparable losses to that of holding long positions in the DXY Index, which finished down 3.88 percent.
[B]Do you have an opinion on where the US Dollar will go next? Find out more about the FXCM Enhanced Dollar-Bull Index Program and the FXCM Enhanced Dollar-Bear Index Program.[/B]
[B]US Dollar Market Activity In April[/B]
During the month of April, the US dollar generally consolidated against the majors, with day-to-day price action centered around re-pricing expectations for the Federal Reserve’s interest rate decision on April 30. Indeed, a month before the FOMC’s meeting, fed fund futures were pricing in a 48 percent chance of a 50bp cut to 1.75 percent. However, as equity markets started to stabilize and US economic releases registered some surprisingly strong readings, futures quickly shifted to predict an 84 percent chance of a 25bp cut to 2.00 percent, and a 16 percent chance of no change.
Taking a closer look at what specifically we saw drive the markets, the Dow Jones Industrial Average recovered from its March lows to surge nearly 800 points toward 13,000, suggesting that risk appetite had returned despite tight credit conditions. A few better-than-expected US economic indicators helped fuel market optimism. On the consumer end, Advance Retail Sales surprisingly rose 0.2 percent with the help of higher prices at the gas pump while ISM Services climbed closer to the 50 boom/bust level to 49.6. Likewise, ISM Manufacturing edged up to 48.6 from 48.3, and while both the services and manufacturing sector reports continued to signal contraction (below 50), the mere improvement was enough to lead pessimism to fade.
There was another factor that led the markets to price in less aggressive moves by the Federal Reserve on April 30: Fed speak. Comments by FOMC members can be one of the biggest market-movers in forex, mostly because the news is unexpected but also because the bias reflected in the commentary will almost certainly be reflected in the upcoming rate decision. First, Dallas Fed President Richard Fisher said on April 17, “I have maintained a strong reluctance to further general monetary accommodation. The answer…is not to compound the bad by repeating the oft-prescribed remedy of inflating our way out of our predicament with a wing-and-a-prayer promise that it can always be reined in later.” Just a day later, Philadelphia Fed President Charles Plosser said, “…the bottom line is that, on the monetary policy front, the Fed’s response to the deterioration of the economic outlook and the turmoil in financial markets has resulted in an accommodative level of real interest rates that should support the market forces that will bring economic growth back toward its long-term trend.” These hawkish comments were more than enough to lead futures to consider the possibility of no change in policy at the end of the month, though the odds were still stacked in favor of a 25bp reduction.
For a comprehensive list of upcoming event risk for the US Dollar, visit the DailyFX Economic Calendar.
[B]Why Enhanced Dollar Index Programs from FXCM? [/B]
· Managed accounts provide diversification, eliminating specific currency risk
· In careful backtests the Programs outperformed the benchmark in both bull and bear markets
· Amplifies returns by seeking to earn interest on positions
· Uses proprietary FXCM sentiment data to optimize entries and exits
Even if you are convinced that being a dollar bull could prove to be a profitable investment in 2008, why should you choose the Enhanced Dollar Index Programs from FXCM to express that point of view? One great reason is that this FXCM product provides all of the benefits of a broadly diversified index. Instead of being forced to guess whether the dollar will rally against the euro, the British pound, or the Japanese yen, the index serves as a weighted average of the key components, and through diversification, it eliminates much of the individual currency risk. Many large banks publish their own versions of the dollar index, but most indices are just an academic exercise, not a real tradable instrument, such as FXCM’s Enhanced Dollar Index Programs
How does the FXCM Dollar-Bull Index Program fare against other dollar index products that are tradable, such as the famous DXY index on NYBOT? In carefully back tested results, FXCM’s Enhanced Dollar-Bull Index Program reduced downside risks by losing less during periods of decline and amplified upside returns by gaining more than the benchmark when the dollar rallied. For those that are bearish on the greenback, the FXCM Enhanced Dollar-Bear Index reduced downside risks by losing less when the dollar rallied and amplified upside returns by gaining more than the benchmark during periods of decline.
[B]FXCM Enhanced Yen-Bear Index – April Performance[/B]
[B]
[/B]
[B]View the Enhanced Yen-Bear Index’s performance since 2003 here.[/B]
During the month of April, the FXCM Yen Bear Enhanced Management Accounts continued to outperform its benchmark, with the Yen Bear Managed Account exceeding the index by slightly more than 1 percent.
[B]FXCM Enhanced Yen-Bull Index – April Performance[/B]
[B]
[/B]
[B]View the Enhanced Yen-Bull Index’s performance since 2003 here.[/B]
Risk aversion worked in favor of those long the Japanese yen during April, and the FXCM Yen Bull Enhanced Management Account ended the month with a more than 5 percent gain.
[B]Do you have an opinion on where the Japanese Yen will go next? Find out more about the FXCM Enhanced Yen-Bull Index Program and the FXCM Enhanced Yen-Bear Index Program.[/B]
[B]Japanese Yen Market Activity in April[/B]
Risk appetite returned to the currency market in April as USDJPY rebounded from its sub 100 March lows to rally all the way to 105.00 by the month’ s end. The rally in the yen pairs was the result of much better performance in global equities (The Nikkei rose from 12.500 to 14,000 the DAX rallied from 6500 to 7000 and the Dow gained 1000 points rising from 12,000 to 13,000) as fears of a meltdown in the financial markets faded from traders minds and doomsday predictions for the US and global economies did not materialize.
US economy registered a number of positive surprises including smaller than expected job losses in April and a strong rebound in ISM Services index which climbed above the 50 boom/bust level for the first time this year. With services comprising nearly 90% of US business activity, currency markets took a more constructive outlook on the US economy readjusting their expectations from a full blown recession to a mere slowdown.
News from other G-11 nations especially such high yielders as Australia also helped to boost demand for the carry trade as the economy in the land Down Under continued to expand at a furious pace. As we noted earlier in the month, “If the bulls are indeed correct that the worst of the credit crunch crisis is behind us and global economy will continue to expand at 3% pace or better, Australia becomes the strongest beneficiary of such an outcome piggybacking on China’s voracious growth.
While RBA may have ended its rate hike cycle for now, it is unlikely to begin easing if economic conditions in Australia maintain their current levels. If RBA stands still, the Aussie with its 7.25% yield will remain a magnet for global investment flows keeping the carry trade very much alive.”
For a comprehensive list of upcoming event risk, visit the DailyFX Economic Calendar.
[B]Why Enhanced Index Managed Accounts From FXCM?[/B]
· Managed Accounts Provide Diversification Eliminating Specific Currency Risk
· In Careful Backtests Outperformed The Benchmark in Both Bull and Bear Markets
· Amplifies Returns by Seeking to Earn Interest on Positions
· Uses Proprietary FXCM Sentiment Data to Optimize Entries and Exits
One great reason is that the FXCM product provides all of the benefits of a broadly diversified index. Instead of being forced to guess whether the yen will rise or decline against the euro or the British pound or the Australian dollar, the indices serve as a weighted average of the key components and through diversification, eliminate much of the individual currency risk. Many large banks publish their own versions of the yen index, but most indices are just an academic exercise and not a real tradable instrument like FXCM’s Yen Bull and Bear Enhanced Management Account.
How does the FXCM Yen Enhanced Management Account fare against yen index products? In carefully back tested results the FXCM Yen Enhanced Index reduces downside risks by losing less during periods of decline and amplified upside returns by gaining more than the benchmark when the yen rallied.
Over the past five year period – a time of extreme yen weakness – the FXCM Enhanced Yen Bear Index outperformed the Synthetic Yen Bear Index during 3 of the past 5 years. In 2004, a very choppy year for the Japanese Yen, the FXCM Enhanced Yen Bear Index gained 7.49 percent against only a 0.87 percent rise in the Synthetic Yen Bear Index. Meanwhile the FXCM Enhanced Yen Bull Index significantly outperformed the Synthetic Yen Bull Index by registering far smaller losses. In 2007 – an extremely volatile year for the Japanese yen – the FXCM Enhanced Yen Bull Index rose 4.59 percent against a 4.88 percent decline in the Synthetic Yen Bull Index.
How is the FXCM Enhanced Yen Index able to achieve such stable and consistent outperformance over relatively long periods of time? The product relies an important tool to help improve performance: FXCM’s own proprietary Speculative Sentiment Index indicator, which optimizes entries and exits. As one of the largest non-bank foreign exchange dealers in the world servicing more than 90,000 accounts, FXCM is privy to the aggregate positioning of its traders. In the past, shifts in positioning signaling a change in speculator sentiment have proven to be accurate signals for a turn in the price of the underlying currency pair. While past performance is no means a guarantee of future success, FXCM Enhanced Yen Index stands as time tested, attractive strategy for those investors looking to get sell short the yen index while trying to outperform the benchmark.