Wednesday, 7 April 2010

Updated positions

Here are the trades I am active in:

Long AUD 3,735,990.04 short JPY at 82.79 average.

Current rate: 86.80
Current: Gain 401 points

See AUD/USD comments below.

USD/JPY: The state of Japanese government finances is extreme. The new government will eventually break the self-imposed debt ceiling and prompt a credit downgrade by the ratings agencies. The recent strength in the USD will continue, pushing the USD/JPY back up towards the 100.00 area in the months ahead.

Still have a longer-term target in the AUD/JPY cross of 105.00. I am happy with the current exposure.

Long NZD 3m short JPY at average of 57.23.

Current rate: 65.70
Current: Gain 847 points.

See Yen comments in AUD/JPY above. See NZD/USD comments below.
I am happy with the current exposure.


Current rate: 1.3402

The ongoing concerns in Europe over debt will not go away. Their basic problem is that they have no central authority that funds the Euro Zone. Each government has its own finance department. Result: chaos when debt becomes unmanageable. Until sovereign debt concerns abate, the euro will remain on the back foot against the USD.

But in the long run, all other things being equal, the Euro Zone debt position is far better than the US. If the US does not move to reduce the budget deficit over time, then the USD will become the next Greece eventually (after the UK!).

I still believe that Europe will raise interest rates before the US does. Watch the inflation readings, Europe is already seeing some inflationary pressures in some German states.

Short GBP1m long USD at 1.4990

Current rate: 1.5150

Current: Loss 160 points.

The UK election has been announced. This will be a volatile time for the GBP/USD. The UK debt load is staggering, with a credit downgrade only a matter of time. Whoever wins the election it will be a poisoned chalice. It may be that the IMF is eventually called in as well. Either way the pound is under steady selling pressure, with my longer term target 1.3000.

Will review on a break above the 1.5500 level.

Long AUD 2m short USD at 0.8670.

Current rate: 0.9250
Current: Gain 580 points.

I believe the Australian economy remains extremely well placed to benefit from ongoing commodity demand, especially with China still growing strongly. I expect ongoing interest rate increases from Australia. I still believe that the AUD/USD has a long way higher to go yet.
My target remains1.0000.

Happy with the current exposure.

Long NZD 2m short USD at .7160.

Current rate: 0.7000
Current : Loss 160 points.

The NZD/USD has lost its way somewhat, with the RBNZ tardy in raising interest rates. They will eventually regret this.

The NZD/USD is still following the AUD/USD, which is now driven by Asian developments. The NZD/USD has not had the benefit of rising interest rates, but this cannot be too far away now. When the RBNZ begins to raise interest rates in June, the NZD/USD will begin to see higher levels again. The NZD/USD still has a long way higher to go yet. Target remains the highs of 0.8216.

Unrealised gains NZD710k (AUD/JPY +227, NZD/JPY +387k, GBP/USD -23k, AUD/USD +165k, NZD/USD –46k).

Total gains banked since August 2007:


Tim said...

Hi Kiwi, something about your post and the Japanese govt and debt ceiling sparked me thinking - what are the laws of currency, if any? I guess in general what you are seeing is something that is unsustainable long term - and betting against it - but what are you looking for to find these somethings?

Kiwi Trader said...

There is no rule book Tim. Many traders spend many years trying to answer your questions. I look for what I think is a mis-alignment in thinking between markets and governments. But you need to understand market dynamics to do that successfully.

Have a read of my post relating to my trading style.

Here's the link:

Anonymous said...


I have been following this blog for a while, which has been very illuminating and educational. Thank you.

I run a successful 100%-export NZ-based software company, so I was forced into a quick-fire FX education decidedly involuntarily. In the last two years our ever-increasing effort in managing FX had been an important factor keeping the company profitable in these turbulent times.

Anyway I am curious in how much capital you need to bring in a realised gain of NZD2,344,360.38. I.e. what has the yield been? Our company has a significant amount of cash assets earning negligible interest; we do not want to invest in stocks and since we have to dabble in FX anyway we are considering more active trades in FX.

Would love to hear your thoughts. Thanks.

Kiwi Trader said...

I have been trading on and off for over 30 years.

I started with very small trades, mostly in the NZD/AUD, and even then in very small amounts. Say $5,000 cash positions. I built my capital up over the years and invested in property and shares as well.

Working in various investment banks I did rather well in the 80's and was not damaged too badly by the crash of 87.

These days I have sustantial forward lines at a bank and I also use a margin broker OMF to trade as well.

I have had to put in more margin in May to cover trades and the bank is probably not happy with my GBP trade at present.

Actually neither am I!!

So, start small. I would say you need to have 4 times the margin on the position in capital and securities available if you are leveraged.

So if the margin is 4%, you need to have 16% available in case it runs against you, and it can easily!!

As we have seen, these markets are very unforgiving, and if you trade long term like me, you have to have substantial capital.

If you are a day trader you need much less, as you place stops to protect positions.

BTW you are unusual as a software exporter in looking to hedge your risk.

Most I have talked to see sales as free money with the software development a sunk cost and it is hard to get them to hedge at all!!

Weird I know, but that is the thinking in a lot of NZ software companies!!

Hope this helps!!