Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk

Hi All,

We asked the meaning of the phrase “dire liquidity” in a Market News report yesterday, and Market News obliged with a full report on worsening conditions in the supposedly liquid Foreign Exchange market. Bid-offer spreads have widened dramatically and the amounts that can be done at even widened spreads have shrunk. This phenomenon is across the board from majors to emerging market currencies. In the Mexican peso, the usual spread was 15 points and good for $5 to $10 million. Now it’s 100 points wide and good for only $1-2 million. In the Australian Dollar exchange rate, the normal 1-point spread used to be good for $10 million, but now it’s good only for $1 million. If a client wants AUDUSD 100 million, the spread goes from 9-10 points to 40-50 points. In the euro exchange rate, the spread for €50 million used to be 3 points and now its 5-7 points. Market News goes on to cite reports showing a big and steady unwinding of unhedged long-term investment positions in emerging markets -and also in Europe.

Buy for Now

Barbara Rockefeller
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