Billion dollar forex bet pays off

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Billion dollar forex bet pays off

#1  Postby Ihavenofingerprints » May 07, 2013 3:54 pm

A story I have been following over the last day... Thought it was pretty remarkable when it came off.

http://www.smh.com.au/business/markets/ ... 2j5j5.html

It may go down as one of the great currency bets in Australian dollar history – a $US1 billion gamble on a Reserve Bank rate cut that has delivered a $US19 million profit in 36 hours.

The beneficiary, if you believe the rumour mill, is investment legend George Soros.

Best of all, it appears the 82-year-old American pulled off the deal three times, all with difference foreign exchange brokers in Asia, for a tidy profit of almost $US60 million.

Not bad for a bloke who, just three weeks ago, was wrongly declared dead.

Soros is a Hungarian-American business magnate, investor and philanthropist, who has built a reputation over the past 25 years of picking the impact of government decisions on currencies and commodities.

...

The world of foreign exchange trading is a complex one. Unlike selling short a stock, an investor can opt to sell a currency at a future date without needing to physically borrow the currency.
The investor simply enter into an agreement to buy or sell a currency for a predetermined price – a ‘‘short number’’ or a ‘‘long number’’ – on a specified future date.

...

The action this time started on Monday, when a major foreign exchange (FX) trader in Hong Kong took a $US1 billion placement order for the Australian dollar, a ‘‘short number’’ of $US1.0373 and a settlement time of 36 hours - just after the RBA announcement.

Those trades were placed via Hong Kong and Singapore, and were believed to be placed by Soros Fund Management.
The Australian dollar was trading at $US1.0320 on spot markets at the time, but fell on the back of bad jobs and retail data.

Brokers – whether they be trading stocks or forex – are talkers. Not long after the $US1 billion was placed, the Aussie dollar slipped from $US1.0284 to as low as $US1.0222 in offshore trade, amid unconfirmed rumours that Soros was planning a raid on the dollar ahead of yesterday’s interest rate announcement.

...

At 2.30pm yesterday, the RBA cut the cash rate by a quarter of a basis point. The Australian dollar plunged immediately to $1.0178 - giving the mystery currency gambler out of Hong Kong a margin of nearly 2 US cents on every dollar.
The profit, notched up in just 36 hours, topped $US19 million.

more at: http://www.smh.com.au/business/markets/ ... 2j5j5.html



It's amazing how people pull this stuff off given how unforgiving the forex market is. The AUD is the most overvalued currency in the world, and only 1/3 of economists polled predicted the reserve bank would cut the cash rate. Making this a ballsy, but smart move in the end.
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Re: Billion dollar forex bet pays off

#2  Postby james1v » May 07, 2013 4:13 pm

Could he have manipulated the market? Spread a few rumours? :think:
"When humans yield up the privilege of thinking, the last shadow of liberty quits the horizon". Thomas Paine.
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Re: Billion dollar forex bet pays off

#3  Postby Ihavenofingerprints » May 07, 2013 4:44 pm

The Reserve Bank don't even know what decision they will make, even few days before the meeting. They like to wait for the latest statistics, even up until the hours beforehand.

Of course there is the chance of some information getting out early. But you also have to understand information being leaked would screw up their plan anyway.

The key here is that bad economic news came out on Thursday/Friday last week, which made this bet a much more realistic chance of winning - which is what I'm guessing was the bet was based on.
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