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New level of volatility

Catherine Deshayes

Currency markets reacted to the UK's announcement of bailout measures to help the banking sector and central banks' rate cuts with a volatility that many traders have never experienced before...

Currencies such as the Australian Dollar saw movements approaching 10 per cent during one day. Other currencies' movements were so extreme that even a few minutes were leading to losses or gains of nearly £10,000 on a single transaction.

Managing Director of currency specialist FC Exchange, Nick Fullerton, said: "The currency markets have not seen these levels of movement in a very long time.

"Customers waiting for currencies to become available at more favourable rates were forced into action by these dramatic and sudden changes. Traders faced a nerve-racking day making sure that customers got the best deals under very difficult conditions.

"These drastic movements were triggered by the extraordinary announcements made throughout the day by the Bank of England and other central banks around the world. Their intervention meant that the markets had to readjust considerably throughout the day.

"Alistair Darling's announcement of a rescue package and the coordinated rate cuts from central banks across the globe moved the focus away from banks to Governments instead and the currencies that were now underwriting their losses. This meant that the markets were readjusting violently causing the values of currencies to change dramatically over the course of the day.

"Now is a great time to buy forward contracts on the Australian and New Zealand Dollar - freezing the current favourable rates for up to two years for a deposit of 10 per cent of the total transaction. Also people selling US dollars are getting a great deal, especially if you are buying Euros."

Source: www.homesworldwide.co.uk