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Trends in FX July 1, 2009

Posted by newyorkscot in Markets.
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The 2009 edition of FXAll’sBest Practice in Foreign Exchange Markets” has some great commentary on what has happened to the FX market in last 9 months: reduced volumes, increased volatility, return to high-touch client relationships, and the lack of liquidity in the forward market (see Page 12). Key point: forward trades (swaps,outrights) are essentially loans and hence need to be modeled/priced as such (think: counterparty/settlement risk from a credit perspective).