Learn how he shattered entire economic regions and made huge profits by betting on their weakness. Uncover the trading strategies and analysis of his biggest and most notorious forex trades ever. It fixed the pound’s rate to the Deutsche mark in order to make the investments between Britain and Europe more predictable and stable. But as the political and financial situation in Germany changed during its unification, many ERM currencies were under big pressure to keep their currencies within the agreed limits. As it became clear that the pound was not able to artificially withstand the natural market forces, more and more speculators began circling around and making plans on how to profit from this situation.
They waited until the financial situation got as bad as it could naturally get, and then created extra pressure on the pound by selling it in huge amounts. The most aggressive of them was Soros who performed this transaction every 5 minutes, profiting each time as the GBP fell by the minute. And then you buy back the sterling when the loan expires. 5 million USD, thus keeping the difference of 0. In order to sustain the fixed rate, the Bank of England was buying 2 billion GBP an hour, which was an unprecedented amount. The policies of the ERM demanded that the countries with the strongest currencies have to sell their currencies and buy the weakest to help maintain the equilibrium. In this case, the Bank of Germany had to sell Deutsche marks and buy pounds.
However, they didn’t come to Britain’s rescue because apparently, Germany had an interest in seeing the GBP devalued. All of Britain’s efforts to pump in money and increase the already high interest rates proved futile. In the late afternoon of September 16, as the traders understood that the Bank of England had insufficient amounts of foreign currencies to buy in all the pounds that were sold, they pushed even more which resulted in a collapse. Have a look at how the British Pound is doing against the US dollar today. Maybe you can spot a nice trend and make a profitable trade! The second most notorious trade of Soros came in 1997 when he saw a possibility that the Thai baht could go down.
His actions were often considered a triggering factor, which resulted in the big Asian financial crisis that affected not only Thailand but also South Korea, Indonesia, Malaysia, Philippines, Hong Kong and others. Soros goes short on the Thai baht. 7 billion to protect the baht against speculations. Soros sells all his baht resources and publicly warns people about its possible fall and ensuing crisis. On July 2, Thailand is forced to give up the fixed rate of the baht and it starts to float freely. Thailand takes on hard austerity measures to secure the loan from the IMF. 4 billion from the falling yen Japan’s economy was seriously damaged after the devastating tsunami in 2011 and its economic recovery had been slow.
Since then, traders have been waiting for the yen to weaken. JPY positions, betting that the value of dollar would rise against the yen. The first one to jump in was Soros who is legendary for his skills of shorting different currencies with high leverages and worldwide consequences. Other big players who opened similar positions include Daniel Loeb, David Einhorn, Caxton Associates, Tudor Investments and Moore Capital. These huge bets helped increase the momentum of the yen’s slide.
This was not only beneficial for the traders who went short on the yen, but also for Shinzo Abe who knew that a weaker yen could make Japan’s export more competitive. This, in turn, was heavily criticized by EU countries who understood that such intervention would lower their export potential because Japanese production would cost less and less. Banks and hedge funds soon started telling their clients to go on this bet as well. The dollar increased even more when Shinzo Abe was elected as the Prime Minister on December 26, 2012. After this, even the Bank of America jumped in to make profits from this trend.