Godfried De Vidts President, ACI
Godfried De Vidts President, ACI

Hedge Funds and FX: Will the marriage last?

Godfried De Vidts looks at the impact that the Hedge Fund industry is having on the FX market.

Foreign Exchange trading that started as the first and prime tool that created our banking industry has now grown up to an estimated 2 trillion US$ daily franchise. No other product equals this size. Many of the senior traders in the markets have all started with this simplest of product: you buy low and you sell high, or the reverse. Are things that simple or do we need to look at other factors? Are the flows between different currencies that should be the basis for transfers from one currency to another still dominating? Or is the proportion more like 10% for real business flows and 90% speculation, or worse?For those long enough in our business, prior to electronic trading, the currency crisis of the ERM when the UK was humiliated is a good reminder of strong forces in the currency markets that have jeopardised many central bankers and careers of Ministers of Finance. And what do we see today, huge movements in commodity prices, the recent fall out in the Carbon credit area, the drop in the Icelandic...continued

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