The dark side of the FOREX - page 2
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This might be interesting to post in this thread : these are the biggest FX participants and their share if market in percentages. I think that what central banks do has more impact on a long run. In a shorter terms, it seems that much more impact comes from "regular" banks
mladen
Where are those percentages coming from?
mladen Where are those percentages coming from?
Euromoney survey
Maybe one more interesting one - previous year data (so the amount of change can be seen too ) :
I agree that in terms of order flow, the banks have the biggest impact. What the article is discussing is the conflict of interest that exists between banks and their clients at the time of the fixing where the benchmark rates are set. In the equity world, the closest thing is the VWAP price.You may see about 30 minutes where prices are affected ahead of the fixing. Also note that the amount of advantage a bank can take is dependent on the net balance of orders, the opportunities vary. The larger the number of orders, the more likely prices will deviate ahead of the fixing. I would say that, you are likely too see just as much volatility due to the unwinding of option hedges where those hedges are liquidated in the spot market.
To put things in context, the moves you see because of this are nothing compared to the effect of one poorly worded statement from any major central bank. The major economies have become so sensitive to interest rates because of historic levels of debt that the only solution is to keep interest rates near zero, generate liquidity and inflate bubbles. What has economists scratching their heads is that quantitative easing is not resulting in inflation as they expected. This is allowing central banks to keep printing and the end result of that is devaluation.
What is interesting to me is that when QE3 is cut back, it will be very much dollar positive but not because the US economy has turned the corner but because quantitative easing is no longer creating the expected results. Interesting times ahead.