FXstreet.com

FX Crossroads

This report has been deactivated

0

0

It is all about risk

Wed, Nov 26 2008, 16:33 GMT
by Danske Research Team

Danske Bank A/S


Summary and conclusions

• In this edition's first article, we define a risk index comprising seven components: implied equity volatility, implied FX volatility, a high yield bond spread, gold, utilities vs. financials, treasuries vs. stocks and emerging markets CDX spread. We use this index to determine the current level of risk aversion and to detect which currencies are affected positively and negatively with risk. We conclude that market sentiment remains too uncertain to enter riskier carry strategies and therefore advise sticking to safe-haven currencies for now. Although USD is found to correlate negatively with risk aversion, we think the greenback has potential due to repatriation flows.

• In the second article, we take a look at the historical depreciations of AUD and NZD. Despite the huge falls, we prefer to stay short both AUD and NZD, preferably against USD. The outlook is less negative for AUD though, and we expect the recent rise in AUD/NZD to continue beyond 1.20 in the short term. We propose two interesting options strategies using reverse knock-out (RKO) put options.

    Published on  Wed, Nov 26 2008, 16:36 GMT


    Archive

    Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
    http://www.danskebank.com/ | danskeresearch@danskebank.com

    Legal disclaimer and risk disclosure

    This publication has been prepared by Danske Bank for information purposes only. It is not an offer or solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. Danske Bank's research analysts are not permitted to invest in securities under coverage in their research sector. This publication is not intended for private customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a member of the London Stock Exchange. Copyright () Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.

    Related reports

    FX View - Headline unemployment rate creates dollar shocker by Interactive Brokers LLC
    Fri, Nov 6 2009, 18:41 GMT

    Forex Daily Overview - USD mixed, unemployment rises to 10.2% by Easy Forex
    Fri, Nov 6 2009, 18:31 GMT

    Forex Daily Analysis - USDJPY is moving towards support level at 89.55 by Investija.com
    Fri, Nov 6 2009, 14:35 GMT

    Forex Technical Report - Dollar Trading Lower Ahead of U.S. Jobs Data by ForexHound.com
    Fri, Nov 6 2009, 13:19 GMT

    FX Thoughts for the Day by Kshitij Consultancy Service
    Fri, Nov 6 2009, 12:02 GMT

    audusd, nzdusd

    View All

    Related content


    Interested in forex trading? forex brokerage firms!


    FOREX.com
    Contact the broker/FDM
    Open a demo account
    		ACM Advanced Currency Markets SA
    Contact the broker/FDM
    Open a demo account
    		MF Global FXA Securities Ltd.
    Contact the broker/FDM
    Open a demo account    		GFT
    Contact the broker/FDM
    Open a demo account    		Alpari (UK) Limited
    Contact the broker/FDM
    Open a demo account

    GET CASH BACK FOR YOUR TRADES!   Learn more about the Pip Rebate Program

    Note: All information on this page is subject to change. The use of this website constitutes acceptance of our user agreement. Please read our privacy policy and legal disclaimer.

    Trading foreign exchange on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade foreign exchange you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading and seek advice from an independent financial advisor if you have any doubts.

    Opinions expressed at FXstreet.com are those of the individual authors and do not necessarily represent the opinion of FXstreet.com or its management. FXstreet.com has not verified the accuracy or basis-in-fact of any claim or statement made by any independent author: errors and Omissions may occur.

    Any opinions, news, research, analyses, prices or other information contained on this website, by FXstreet.com, its employees, partners or contributors, is provided as general market commentary and does not constitute investment advice. FXstreet.com will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

    ©2009 "FXstreet.com. The Forex Market" All Rights Reserved.