, Columnist
Currency Manipulation Has Another Meaning for Traders
Hedging can help explain some of the recent seemingly head-scratching moves such as the dollar's weakness.
A different manipulation.
Photographer: Mary TurnerThis article is for subscribers only.
Politicians like to throw around the phrase “currency manipulation” when they feel that some other nation has developed an unfair trade advantage by way of an artificially weak exchange rate. In the currency markets, though, it has a more benign meaning and can help explain some of the seemingly head-scratching moves of late such as the dollar’s weakness.
That’s because when it comes to hedging, “manipulation” is fairly common as a result of the natural arbitrage that exists between the different levels of interest rates of nations, and their relation to spot and forward exchange rates.