Currency Update for Steel Trading Nations November 11th 2014

Explanation of data sources: The broad index is published by the Federal Reserve on both a daily and monthly basis. It is a weighted average of the foreign exchange values of the U.S. dollar against the currencies of a large group of major U.S. trading partners. The index weights, which change over time, are derived from U.S. export shares and from U.S. and foreign import shares. The data are noon buying rates in New York for cable transfers payable in the listed currencies. At SMU we use the historical exchange rates published in the Oanda Forex trading platform to track the currency value of the US $ against that of sixteen steel trading nations. Oanda operates within the guidelines of six major regulatory authorities around the world and provides access to over 70 currency pairs. Approximately $4 trillion US $ are traded every day on foreign exchange markets.

The reversal of the ‘carry-trade’ (borrow US$, buy something else higher yielding) has actually been well underway since the Fed announced last year that it would end QE3. Emerging country currencies have plummeted, together with commodity prices. Australian and Canadian commodity producers that borrowed heavily in USD have been doubly hit by a stronger US$ and plunging commodity prices, and their share prices have plummeted.