Currency Trading and Intermarket Analysis: How to Profit from the Shifting Currents in Global Markets
It shows his deep and extensive knowledge of the currency markets in this book. As one of the most prolific analysts in the Forex markets, Ladidi describes the historical linkage of monetary policy, global finance and currency markets in a readable introduction for any student in global markets. "
-Ginger Szala, editor / editorial director, Futures magazine
Group
"Barron readers often ask if there is a book that explains how markets really work." After reviewing textbooks and graduate studies, it took more than three decades to cover markets to learn that academics live in a A different world from everyday markets, Ashraf Ladidi has produced an accessible work for the layman but at the same time it provides a sophisticated vision of all the markets (commodities, precious metals, credit and stocks) and how they interact with the larger market. all, the coins, if I had this book when I started! "
-Randall W. Forsyth, Editor, Barron's Online
"A very detailed book with an important flow of information and specific details related to some well-known periods of changes in USD Clearly should beginners who seek a better understanding of FX movements in recent decades should like it. Sophisticated, they will appreciate discovering the new angles introduced in the dissection of the main developments in the coins. "
-Hamid Bousba, Director, Senior Portfolio Counselor, Citi Private Bank, Citibank (Switzerland)
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Preface
Acknowledgments
CHAPTER 1 Gold and the Dollar
End of Bretton Woods System Marks Gold’s Takeoff
Fed Tightening and FX Interventions Rein in Gold Rally
Central Banks’ Gold Sale Agreements
Gold-USD Inverse Relation
Recent Exceptions to the Inverse Rule
Using Gold to Identify Currency Leaders and Laggards
Gold’s Secular Performance
Valuing Currencies via Gold
Golden Correlations
Don’t Forget Falling Gold Production
Gold and Equities: Hard versus Monetary Assets
Equity-to-Gold Ratios
The Role of the Speculators
Gold Is Part of a Larger Story
CHAPTER 2 Oil Fundamentals in the
Currency Market
From a Gold Standard to an Oil Standard (1970s–1980s) 2
6
Oil Glut and Price Collapse (1981–1986) 3
2
The Super Dollar of 1980–1984: The World’s Third Oil Shock 3
4
vii
CONTENTS
World Intervenes against Strong Dollar (1985–1987) 39
Iraq’s Invasion of Kuwait and the Gulf War (1990–1991) 41
The Asian Crisis and OPEC’s Miscalculation (1997–1998) 44
Oil Thrives on World Growth, Dot-Com Boom (1999–2000) 46
Iraq War Fuels Oil Rally, Dollar Flounders, China Takes Over
(2002 to Present) 46
Summary 49
CHAPTER 3 When the Dollar Was King (1999–2001)
51
The Major Theories 52
Annual Performance Analysis of Individual Currencies 53
Summary 70
CHAPTER 4 The Dollar Bear Awakens (2002–2007)
71
2002: The Beginning of the Dollar Bear Market 71
2003: Dollar Extends Damage, Commodity Currencies Soar 78
2004: Global Recovery Boosts Currencies against U.S. Dollar
2005: Commodities Soar alongside Dollar, Carry 84
Trades Emerge 90
2006: Dollar Vulnerable as Fed Ends Two-Year Tightening 94
2007: Record Oil Boosts Loonie, Helpless Fed Hits Greenback 102
Lessons Learned 108
CHAPTER 5 Risk Appetite in the Markets 111
Carry Trades in Foreign Exchange 112 Using Risk Appetite to Gauge
FX Flows 121 Tying It All Together: 1999–2007 134
CHAPTER 6 Reading the Fed via Yield Curves,
Equities, and Commodities 137
Yield Curves and the Economy 138
Types of Yield Curves 139
Rationale of Inverted Yield Curve Implications 142 Effectiveness of Yield Curve Signals’ Implications 142
Contents ix
Greenspan’s “Conundrum” Proved Bernanke’s Problem 14
3
Implications for Growth, Stocks, and Currencies 14
5
Tying Interest Rates to the Gold-Oil Ratio 15
3
Conclusion
CHAPTER 7 U.S. Imbalances, FX Reserve 15
8
Diversification, and the U.S. Dollar 161
The U.S. Twin Deficits
U.S. Current Account Deficit: Old Problem, New Challenges 162
165
Adding the Budget Balance to the Mix 169
Financing the Deficits: The Path to Unsustainability? 170
Dissecting U.S.-Bound Foreign Capital Flows 172
U.S. Stocks and Bonds Vie for Foreign Money 173
Capital Flows Shift Identities 177
Foreign Direct Investment and M&As 179
How Long Will Foreign Capital Be Available on the Cheap? 181
Don’t Ignore U.S. Investors’ Flows Abroad 182
Currency Reserve Diversification: OPEC and the Middle East 185
Further Currency Diversification Is Inevitable 187
The View Ahead 189
CHAPTER 8 Commodities Supercycles and Currencies
191
The Current Commodity Cycle versus Previous Cycles 193
Dissecting Commodity Classes 196
Commodities and their Currencies
Developing World to Maintain Ripe Outlook for Food and 207
Grains 208
Energy Efficiency Not Enough to Halt High Oil 214
Copper and Gold to Shine on Long-Term Fundamentals 219
Commanding Heights or Common Bubbles? 223
CHAPTER 9 Selected Topics in Foreign Exchange 225
Revisiting Yield Curves 225
Is Dollar Stability a Necessity? 230
CONTENTS
How Far Will Commodities Outstrip Equities? 236
U.S. Politics and the U.S. Dollar 240
Conclusion 247
Bibliography 249
About the Author 251
Index 253
www.moneyactivo.com
O
n the day of my birth, “Good Friday” March 31st, 1961, the Dow Jones Industrial Average was sitting at 678.5. The dollar was
still anchored to gold, exchangeable at $35 an ounce. Interest rates were regulated and low, the economy was strong and steady in the fifteen years after the end of World War II.
The “Bretton Woods” global currency system of fixed exchange rates was in place and there was relative stability in the pre-Vietnam, pre-hippie years.
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