5 questions with Garth Appelt

Garth Appelt
Garth Appelt Head of Foreign Exchange, Mizuho Americas
November 30, 2021

1. How is FX different from other markets?

The FOREX market has unique qualities that make it distinct from other asset markets. First, it’s the largest of all tradeable markets (over three times the size of all the global equity markets combined on a daily basis), and is very diverse. A wide range of products are traded in the FOREX market, such as cash, swaps, and options, and the market is also used for a range of purposes, such as mergers and acquisitions, and the issuance of bonds or securities in multiple jurisdictions. 

On top of that, each currency has its own interest rate and regulatory framework, and when people discuss the US Dollar, they may speak about it as an index versus a variety of currencies or its distinct value against a specific currency like the Euro, Yen, or Canadian Dollar. 

Non-Deliverable Forwards (NDF) are another unique feature. Many Emerging Market countries have “restricted currencies,” or currencies that are regulated by capital controls, which are not unified and can be complex – hence the need for NDFs, which allow transactions to be settled in freely-traded currencies.  

2. What are the current trends in FX, especially in light of a Fed that is signaling rate hikes?

When you think of currency valuation, 40% of all money ever printed in the United States has happened in the last 18 months. This would imply a weaker currency (and hence the rise of crypto currencies over Fiat currencies), but the key is understanding that currency trading is the exchange of one currency for another, and in this market structure and global economy, the USD is the best performer amongst its peers. 

If the Fed tapers or hikes faster than predicted, this would accelerate USD ascendance. This is the tight rope the Fed is walking. 

3. Does the rise of cryptocurrency impact FX rates?

Currently, the FOREX market remains dominant in its sheer size, but its lower volatility means there are fewer opportunities as compared to crypto. In fact, three-month FOREX volatility currently sits around 6%, while three-month Bitcoin volatility is above 90% - and even higher for smaller coins. 

As a result, we’ve seen several trading firms begin offering both FOREX and crypto trading to their clients, and a migration of currency traders who have left for crypto. Technically, if we move more to the digital space for exchanging goods and services, this would affect volumes in the FOREX market. Though there is talk of pricing commodities in crypto, and of Central Bank-issued digital currency, we are a long way from that occurring simply because it would require complete and unilateral acceptance of this new market structure. 

4. Before we began office reintegration, how did you keep your team connected while working apart during the pandemic?

One of the best things about being on a trading floor is the mind share that happens when you are trading and speaking with clients. Solving for filling this gap can be quite daunting because the organic nature of the trading floor is an ecosystem in and of itself. On a trading floor you are constantly listening to conversations, whether it’s trader to trader, trader to customer, or trader to sales, and it allows you to discuss different market scenarios, exchange trade ideas, discuss investor flows, and hear corporate needs. Often, news or data will come out that starts to affect market valuations. 

To mimic this environment as best we could, we created a virtual trading desk using a special speaker hooked into a perpetual WebEx meeting, where we could speak to each other all day long like we were on the desk. We have also had to increase our dialogue with other desks by creating Bloomberg Group chats and by having daily, multi-product morning meetings for everyone to attend. Now that we are moving back to a more normal in-office environment, we have maintained these enhancements and we now communicate more than we did prior to COVID.  

5. What do you do to relax from FX’s relentless pace?

The incredibly vast number of currencies traded, and the jurisdiction and time zones for optimal liquidity, make FOREX like New York City – the market that never sleeps. The market opens on Monday morning in New Zealand (Sunday afternoon in New York), and normally trades continuously until 5pm Friday. This makes monitoring risk and meeting client needs unique in the FOREX market – and it’s a trader’s life. On weekends, it’s important to bond with your family and turn the screens off. 

It’s also critical that team members support one another. Holidays all across the globe mean that monitoring liquidity and optimal times for transacting is a 24-7 job. Our team works well to support each other, acting as a family unit where everyone is helping each other meet client needs.  We survived COVID together because we worked so closely together prior to the health crisis. Our number one asset is each other. 

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