Theory The tension between speculative inflows and fundamental outflows continues to increase, causing violent price swings, until such point as those inflows are not sufficient to offset the rising tide of outflows. Like an inventory overhang that seems to appear out of nowhere in the wake of over-investment, the result is a supply–demand imbalance in [...]
Speculators Join the Crowd — The Local Currency Continues to Rally [practice]
From October 2000 through March 2001, Polish bonds roared higher, benefiting from cuts in official policy interest rates in response to clear signs of slowing economic activity within the Polish economy. The dollar–Polish zloty exchange rate, which at one time had been as high as 4.75 extended its downward trend, at one point breaking through [...]
Fundamental Deterioration — The Local Currency Becomes Volatile [practice]
From March to mid-June 2001, the Polish zloty continued to appreciate, albeit in an increasingly chaotic and volatile manner. Frequent sell offs would be followed by sharp rallies. Asset managers were more and more aware of the degree of slowdown in the national economy. While this should conversely be good news for fixed income investors [...]
Fundamental Deterioration — The Local Currency Becomes Volatile [theory]
Fundamental investors and speculators do not necessarily sit easily together. They have different investment aims and parameters, the first looking for regular investment capital gain or income over time, the latter looking frequently for short, quick moves. Granted, this is a gross exaggeration and generalization, but it gives at least something of a flavour for [...]