Introducing broker: According to the Financial Times, a currency war is imminent.
For the last few months some of the giants of the hedge fund world have made billions betting against the Japanese yen. Since the beginning of November, the US dollar has risen 17 per cent against the yen.
But it is not just a bet against the yen; the sterling pound is having disappointing economic growth in the UK. The threat of a downgrade of its debt and an upcoming change of guard at the Bank of England has fuelled concerns about a drop in the country’s asset values.
More speculators are shorting the pound than buying it for the first time in five months, according to figures from the US Commodity Futures Trading Commission which is used as a proxy for activity in the global hedge fund community.
Betting against the pound is second only in popularity to shorting the yen, which has plunged in value against other currencies this year as investors have positioned themselves for more expansionary monetary policy in Japan.
Investors around the world might follow the tendency — including an introducing broker — in order to make profit by trading against this two currencies.
After the designation of the Japan prime minister in December of the last year, who would implement aggressive monetary and fiscal stimulus to spur growth. As a mechanism to protect the value of their investments all the largest hedge fund start a campaign to decrease the value of Japan currency Yen, which might affected those investors who possess positions in the currency at a long term, an introducing broker might suggest their clients to sell before the price gets cheaper.
On the other hand, the sterling pound has been decreasing in value because the UK economy hasn´t grown enough and many investors decided to trade against that currency which has been decreasing in price.
For an experienced introducing broker, this ‘war’ could represent profit if the investments are approached by using the fluctuation as an advantage. For those who don’t trade, if their futures are represented either in yens or sterling, before the price drops then they might lose money.