Australian Currency (FX) Market Facts
It goes without saying that the global currency (FX) market is one of the largest in the world. It's estimated that as much as $5 trillion of spot currency or derivative contracts trade each day!
The FX market is principally traded in two forms:
- Spot markets - trading of currencies like you and I would do for travel or business
- Derivative markets - options, futures and forward contracts are used by investors and businesses with interests overseas. These derivatives are traded on Over-The-Counter (OTC) markets or via Exchange options
Here in Australia, investors and traders can use the currency (FX) market for speculation, hedging or risk reduction, by positioning their portfolio accordingly.
Australian Shares Set To Open Lower, 3 ASX Shares To Watch
The ASX 200 (INDEXASX: XJO)(^AXJO) is expected to open lower today, while the USA’s S&P 500 Index (.INX) fell by 0.79% on Tuesday. Here are three companies to watch today.
Australian Shares Set To Open Lower, 3 ASX Stocks To Watch
The Australian share market, or ASX200 (INDEXASX: XJO)(^AXJO), is expected to open down today as the USA’s S&P 500 Index (.INX) fell by 2.93% on Wednesday.
Guess What? Aussies Have Invested $50b In ASX ETFs
ASX-listed exchange-traded funds (ETFs) have reached a combined market capitalisation of more than $50 billion.
Can The Vanguard Fixed Interest ETF (ASX:VAF) Continue To Rise?
The Vanguard Australian Fixed Interest Index ETF (ASX: VAF) has performed strongly as falling bond yields have surprised economists and investors alike.
Why I Like Australian ETF Investing
The latest S&P Dow Jones Indices report shows that after fees 80% of large-cap equity funds failed to beat the S&P/ASX 200 over the 15 years to 30 June 2018.
EM Markets “Compelling” Says Ellertson’s Dr Manning
With a recent sell-off and trade talks easing, plus more capital on its way, Manning says emerging markets are once again looking favourable for investors.
FX Speculation V. Investing
The FX market is a highly liquid market with trillions of dollars being transacted each day. Many short-term speculators ("traders") attempt to make money from these markets via trading accounts and occasionally with the use of high-risk products like CFDs and options.
Investors also use the currency (FX) market to their advantage by allocating part of their wealth in foreign currencies. For example, just in case the Australian economy (and the Aussie dollar) shows signs of weakness. Many investors access the global currency markets by using ETFs or managed funds.
Caution on Fees & Holding Structures
The global currency markets are the most liquid in the world. Meaning, there is a lot of trading going on every second of every day.
Therefore, when you're looking to invest in Currency (FX) ETFs on the ASX, pay close attention to fees -- obviously, lower equals better. It shouldn't cost the earth to get exposure to the major global currencies like the US Dollar or Euro.
Also, take note of the way the ETF issuer gets you the currency exposure. If they're simply taking your money and parking it in an overseas bank account, make sure they're earning a decent interest rate for that country and the bank is a reputable one.