Institutional Investor's Alpha Magazine - November 2007 - (Page 29)

ers believe that the past two administrations have in fact favored an unstated policy of dollar depreciation. Why has the U.S. adopted what is in effect a policy of benign neglect? How much power do the G-7 ﬁnance ministers have to bring about change? A lower dollar makes imports more expensive and induces people outside the U.S. to consume U.S. production, which tends to narrow the trade deﬁcit, one of the global imbalances that the ﬁnance ministers of the G-7 have targeted. It’s Economics 101. How do the G-7 meetings guide currency trading? These days there’s nothing likely to come out of the G-7 in terms of coordinated changes to monetary or fiscal policy, or market intervention. Nonetheless, markets do tend to react to official comments. There’s always a lot of buzz surrounding the ministers’ discussions, and the market looks for both explicit intention and nuance in their pronouncements, much as Fed watchers hang on Alan Greenspan’s or Ben Bernanke’s every word. How does monetary policy affect your trading? At the end of each G-7 meeting, an official communiqué is issued. It typically describes the concerns of the ministers with regard to global economic issues. As with any official release, the market looks for deviation from past views or past language — from information that is already built into market prices. When markets are nervous, as they have been since the middle of the summer, these meetings take on even greater importance. As late as the Friday afternoon before a typical weekend meeting, currency markets can be unusually active as traders make last-minute adjustments to their positions based on early indications of potential changes in the ministers’ focus. Policy per se is perhaps less important than understanding how to proceed if the market perceives that monetary policy is changing. My team doesn’t try to outguess the Fed or the Fed watchers. We operate in the currencies of developed economies, stay abreast of market positioning, practice solid risk management and try to assess at all times how the rest of the market sees the world. Will the current market turmoil have a long-term effect on the currency market? There is still new money, big money, coming into the sector. I see that continuing for some time to come. Alpha Sponsored Statement Serviced Apartments Like No Other A t Apartment O, we bring you the best of both worlds. Each of our three-bedroom units boasts of fine art and furniture that bring you back to the last glory days of Old Shanghai or the colonial grandeur of Old Hong Kong. At the same time, you are treated to the comforts of cutting edge media technology: ● 42” LCD TV with “Now” Channel ● Home entertainment system with Hi-Fi, DVD player and recorder ● Free wireless broadband Apartment O offers many unique details that set it apart from standard serviced apartments: ● Miele kitchen appliances ● Detailed artwork on wardrobes and mirrors ● Dorn Bracht bathroom fittings with handpainted cherry blossom tiles Experience ultra luxury living at Causeway Bay Apartment O. For details, please go to: www.apartmento.com.hk http://www.apartmento.com.hk

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - November 2007

Institutional Investor's Alpha Magazine - November 2007 Contents Letter from the Editor Longs & Shorts Pension Corner: Patriot State The Good Guys: College Connection Interview: Currency of Change Cover Story: Comeback Kid Strategies: Masters of Art Research Center: Alpha Awards: Top Technology Providers Top Analysts Alpha Bytes: Critical Choice Unhedged: Commentary: Banking on a Bubble

Institutional Investor's Alpha Magazine - November 2007

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