Beginners Guide to FX Trading

Trading forex is the act of simultaneously buying one currency while selling another for the purpose of speculation. As one of the world's most traded markets, it has an average turnover in excess of US$4 trillion daily, which when compared to the New York Stock Exchange - whose turnover is typically around US$50 billion daily - you can see how popular this particular market really is.


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It is important to remember; trading on margin carries high risk and the possibility exists that you could lose some or all of your investments, including your initial deposits, making it unsuitable for some investors.


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FX traders hunt new opportunities

Calm in currency markets is causing a headache for foreign exchange traders, who are struggling to make money as major currencies trade in a tight range, and storing up trouble for investment banks relying on the sector to generate profits. With the euro trapped between $1.30 and $1.35 since January, the Swiss National Bank capping the Swiss franc. 

Investment banks tend to lump currency trading in with bond and commodities trading, without breaking out income for the various businesses. Such units as a whole contributed more than half of revenues at the top 10 investment banks in 2011, according to analytics group Coalition.

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The rupee today fell below the 53 mark intra-day before closing at nearly four-month low of 52.96/97, down by 23 paise against the U.S. currency, due to firm dollar demand and fears of more capital outflows.
Strong dollar overseas and expectations of more capital outflows in the wake of uncertain local equities weighed on the rupee.
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RBI intervention

After a gap of four months, the rupee fell below 53 to the dollar in early trade on Wednesday, triggering hope of possible intervention by the central bank. The closure was at 52.96 after trading between 53.01 and 52.60 per dollar. It had closed at 52.73 on Monday. According to market participants, the mere presence of the central bank helped the rupee regain 15 paise intraday, though intervention was only $100-150 million.


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Dollar extends

The ICE dollar index, which measures the greenback against a basket of six other currencies, reached 79.199, up from 79.151 in late North American trading Wednesday. Liquidity conditions were thin in Asia owing to the Japanese holiday, but the broad bias has been one of caution, The dollar index had advanced Wednesday after data showed unemployment in the euro zone hit its highest level since the introduction of the shared currency, and manufacturing data weakened as well.


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INDIAN RUPEE UPDATE


The rupee declined by 26 paise in early trade today to hit fresh four-month low of Rs 53.22 against the American currency on the Interbank Foreign Exchange due to firm dollar demand amid increased capital outflows.

Rupee/US dollar

On a week-on-week basis, the US Dollar Index (DX) weakened around 0.7 as better-than-expected pending home sales and consumer spending overshadowed the unfavorable unemployment claims and lower-than estimated economic growth data from the country which led to upbeat sentiments in the US markets. The Indian Rupee (INR) witnessed depreciation of almost 1 percent in the last week taking cues from weak sentiments in the domestic markets after rating agency Standard & Poor's (S&P) lower the country’s outlook to negative from stable due to slow growth on its fiscal condition and weakening economic indicators. In addition to this, rising concerns over capital inflows in the country and month-end dollar demand from the oil importers also affected the currency.


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