US vs Canada dollar

[DcifrThs]

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stinky pete is right. Best indicator of where it is headed is the futures market.

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This is wonderfully wrong.

First off, the 'futures' market in FX is about 1% the size of the forwards market.

Secondly, the forward market is simply the arbitrage-free rate for currencies and interest rate markets to exist - they are recursive and you can't price one without the other. It is in no way predictive.

former fx trader,

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futures=forwards when we're having this type of conversation imo. at least i took it to be such. as in i thought he meant forwards...

IR + forward price=know what is priced in.

Barron

[stinkypete]

for the record i indeed was referring to forward contracts, not futures. this isn't really my field so i mix up the terminology from time to time. i don't even know what kind of futures exist for USD/CAD.

[NajdorfDefense]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
stinky pete is right. Best indicator of where it is headed is the futures market.

[/ QUOTE ]

This is wonderfully wrong.

First off, the 'futures' market in FX is about 1% the size of the forwards market.

Secondly, the forward market is simply the arbitrage-free rate for currencies and interest rate markets to exist - they are recursive and you can't price one without the other. It is in no way predictive.

futures=forwards when we're having this type of conversation imo. at least i took it to be such.

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That's not what was said, and they are different markets. Just to be clear.

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IR + forward price=know what is priced in.
Barron

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You got this wrong again/are being redundant.

The forward price *already has* the IR component priced in, you just double counted it.

Naj

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
stinky pete is right. Best indicator of where it is headed is the futures market.

[/ QUOTE ]

This is wonderfully wrong.

First off, the 'futures' market in FX is about 1% the size of the forwards market.

Secondly, the forward market is simply the arbitrage-free rate for currencies and interest rate markets to exist - they are recursive and you can't price one without the other. It is in no way predictive.

futures=forwards when we're having this type of conversation imo. at least i took it to be such.

[/ QUOTE ]

That's not what was said, and they are different markets. Just to be clear.

[ QUOTE ]
IR + forward price=know what is priced in.
Barron

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You got this wrong again/are being redundant.

The forward price *already has* the IR component priced in, you just double counted it.

Naj

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if i gave you the currend USDvCAD spot rate and the USDvCAD 3 mo forward rate, could you tell me the IRs that were priced in?

no. you could tell me the ratio of the rates that are priced in, but you could arrive at that ratio via different IRs, so while the forward price of course counts the IR, you can't gain the level of IR from it w/o knowing at some point the actual rate at some point in time.

USDvCAD lets say is at C$1.10, if the forward price is C$1.05, we know that the USD is priced to depreciate and has a higher interest rate...but we dont know either IR so we need that info also to know what is priced in in terms of levels of IRs.

we're (or maybe just I am) having a rediculously stupid discussion since it is definitely reduntant. fwd=spot*rate differential. futures != forwards literally...however for the purpose of discussion here it is an oversight, not a glaring massive error.

i'll now take a 180degree turn here and say you pointing this all out is appreciated b/c having a conversation here that uses incorrect wording or ideas could be carried over to conversations in the "real world" with real people. in the latter case, making that kind of fau paux (sp?) could cast doubt on one's overall knowledge or cause silly debates etc. so it is worthwhile to be precise at all times.

Thanks,
Barron

[ahnuld]

I meant forward, I know what barron means, stop being a nit

[NajdorfDefense]

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I meant forward, I know what barron means, stop being a nit

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As Barron said, forward <> future, but others will
a) lurk here and get confused, or
b) know the difference and think you/we are clueless [esp if you are young] when you/we misuse well known market terms, acronyms, whatever.

Clear writing means clear thinking. One of the best pieces of advice I ever got. Words have a real definition that it is important to get correct in these discussions.

I am sure you know the difference, just trying to be helpful to the dozens of lurkers here....m'kay?

[NajdorfDefense]

Barron, that's fine, but as LIBOR or T-Bill rates are printed on front of WSJ/FT/easily found on teh interweb/BBG/Reuters/ Telerate it's kind of ridiculous to assume someone who is obtaining 3-mo CAD forwards or outrights can't get the appropriate IR to go with it.

Nittily yours,

Naj

[ahnuld]

yeah no problem. In fact I just wrote my final in International finance where one of the questions was list the differences between the forward and futures currency market last week so its pretty bad I used the wrong one.

[DcifrThs]

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Barron, that's fine, but as LIBOR or T-Bill rates are printed on front of WSJ/FT/easily found on teh interweb/BBG/Reuters/ Telerate it's kind of ridiculous to assume someone who is obtaining 3-mo CAD forwards or outrights can't get the appropriate IR to go with it.

Nittily yours,

Naj

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Naj,

nitty is good. that was my mistake.

THanks,
Barron

[PatInTheHat]

Thanks for all the responses guys, much appreiated.