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Currency Turbulence In The Investment World

This article is reproduced with permission from
Normandy Advisory Services Sdn. Bhd (Licensed Investment Advisor)
15th Floor Menara Multi-Purpose, No 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur
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Asia is roiled by currency jitters and fluctuating stockmarkets. The issue of foreign exchange took centre stage recently with the contagious attacks on the regional currencies - the devaluation of the Thai baht and Philippines Peso, and the raids on the Malaysian Ringgit, Singapore Dollar and Indonesian Rupiah. The general strength of the U.S. dollar against most other major currencies added pressure on these regional currencies.

Off-shore hedge funds backed by their leverage power and investors from around the world speculated heavily to make quick profits in the regional foreign exchange or currency market causing a great deal of concern among various quarters.

The regional currencies were not alone in the speculative attacks as some currencies out of this region were also affected. The regional stockmarkets including the local bourse was badly affected as investors fled the markets in view of the uncertainties.

Some currency traders have been known to make handsome gains when speculating in this manner. Speculation in the currency market has long been known and it is as common as punting in the stockmarkets. In the currency market, investors book profits when they are able to buy at low and sell high or sell at high and cover (buy back at lower prices).

The 1994 Mexican crisis, the devaluation of the Pound Sterling in 1993, and the recent Thailand currency crisis are some of the eye-catching events.

Like stocks and commodities, currencies, form the biggest financial market in the world, provide opportunities for investors to make money. However, speculating in currencies involve a greater degree of risk.

Due to the huge amount of funds traded every day, millions could be made or lost within seconds. Like derivatives or some speculative stocks, currencies can offer tremendous gains but also produce dramatic losses.

Individual direct investment in the currency market is generally not recommended by advisors. Speculating in currency investments to hunt for short-term gains is definitely not for the inexperienced investors.

The likelihood is that you may get yourself burnt particularly if you do not understand the market well. In fact, even experienced currency speculators have at times lost bundles of money.

The on-going pressures on the badly mauled currencies of the regional economies has given an impression of a volatile currency market.

Currencies play an important role in the global financial circles. As economic boundaries break down and financial market becomes more open, the currency market becomes an even more important channel to facilitate transactions.

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