‘Cannot Afford to Lose Your Cool’ : Traders Take Spotlight as U.S. Dollar Stumbles
The moon was a silver dollar over the First Interstate Bank building in downtown Los Angeles when Mark Healy reported to work before dawn.
Fueled only by a breakfast of a banana and orange juice gulped down on the way in from Malibu, the Toronto native sat down at 5:30 a.m. at his work station: a table packed with flashing computer screens and telephone consoles buzzing with voices from all over the world.
One of the screens relayed a less-than-reassuring message from Barclays Bank of London: “Expect a choppy day.” But then again, a little choppiness is hardly unusual in the world of currency trading, a business that requires the stomach of a professional poker player and the mind of a sophisticated economist.
It also is a field that has been in the spotlight of late, as attention throughout the world focuses on the dollar, America’s fast-falling currency. Treasury Secretary James A. Baker III has encouraged the plunge in the dollar’s value as a way to make U.S. goods more competitive on world markets.
Yet the dollar’s unpredictable pirouettes and tumbles--based on lightning-quick profit-making worldwide at such trading tables as this one--raise insecurity. Foreigners worry about the higher prices they must charge for their exports to the United States and about losing money on their investments in U.S. currency.
Americans, meanwhile, fear that the greenback’s lower level will provoke a new burst of inflation and higher interest rates. In recent weeks, national banks from Japan and other nations have bought billions of dollars in a largely futile attempt to slow its skid.
Periodically, U.S. Presidents and the leaders of other countries have blamed currency traders for disrupting international finance, a charge the traders consider grossly unfair. “Fundamental economic realities are what ultimately dictate where the market is going to go,” said Robert A. White, a First Interstate vice president.
White added that First Interstate participates in the markets to serve its clients--large corporations and other moneyed interests around the world--who need different currencies to conduct business. The bank also profits on the efforts of Healy and his colleagues.
Nonetheless, trading is a volatile enterprise to be sure, where the latest rumor or political utterance propels a nation’s currency up or down dramatically in seemingly irrational ways. “If you panic, you’re really going to get creamed,” said Healy, 28, who previously worked at the Bank of Montreal. “You cannot afford to lose your cool.”
The stakes can also be breathtaking: “When things really get going, it’s sometimes hard to remember if you sold five or 10 or 20,” he added, neglecting to mention that he meant five or 10 or 20 million.
Day Starts Well
The day, earlier this week, started well for the polite young trader, who wears wire-frame glasses and parts his brown hair neatly down the middle. He had gone “long” on Canadian dollars the night before--bought them, in trader’s parlance--and, by the time he arrived at work, the purchase had increased in value by $65,000.
Healy and his colleagues were interested in a recent statement by Satoshi Sumita, a Japanese financial official, that the major industrial powers were prepared to take tough steps to prevent the dollar from dropping further. Early prices from New York showed that the comment was bolstering the dollar, which had taken yet another pounding the day before.
Then a rumor began spreading through the financial markets. Baker, in a private meeting with business leaders, was said to have supported a continued fall of the dollar. The currency began to weaken once more. Then Reuters news service hurried out a report contradicting the rumor. The new account was read at banks and brokerage offices throughout the world.
“All the people who bought dollars based on Sumita’s statement now have to sell them,” noted Brad Meredith, 30, a yen specialist sitting catty-corner across the big table from Healy.
At about 6 a.m., with the sky outside the 12th-floor trading table still a violet haze, the clanging of a bell announced the arrival of a Dow Jones financial wire bulletin, which was posted on a big screen overlooking the table.
‘It’s a Non-Event’
The Federal Reserve Board had released the U.S. industrial output figures for March, showing a 0.3% drop. The figure wasn’t impressive, but it wasn’t surprising either. For a moment, the room seemed eerily silent. “The market’s not reacting to it,” Healy declared. “It’s a non-event.”
While Healy focused on dollars and German marks, others had their own concerns. Just across the table, Daniel Butko, 31, a specialist in the British pound sterling, was having a light day. “Sterling is hard to trade because lots of American banks don’t have customers for it,” he said.
Nonetheless, Butko was soon to become the day’s first casualty, falling victim to “trader’s elbow”--a condition in which the constant nervous friction of a trader’s arm against the table tears a hole in the shirt.
In a more peaceful corner of the room, meanwhile, Alejandro Cortes, 31, peered into a computer screen, trying to ignore the immediate political concerns galvanizing everyone else. Cortes’ cues come from the world of mathematics, as he feeds data into an IBM computer and seeks to ferret out trends, some in the long range, some more immediate.
On occasion, it responds with patterns: trend lines with nicknames like “head and shoulders,” “double top” and “island reversal”--each with special meaning to traders desperate for any edge over the competition. “If there’s a head and shoulders, I’ll tell them (his colleagues),” the native of Colombia said, “because everybody else in the world is looking too.”
‘I Need Calls’
As Cortes was explaining his specialty, Healy suddenly shouted out: “I need calls on marks, please.” He felt that he had too many dollars, based on the market’s latest subtle hints, and sought to increase his holdings in German marks.
Immediately, everybody at the table jumped into action, soliciting possible deals over the telephone. “I felt the market starting to move, and I reacted,” Healy said. “Everything in this business is timing.”
As the traders shouted prices to him in a flurry of action, Healy became a traffic cop, motioning yes or no depending on what he thought of the particular offer.
“We’re not craps shooters,” he explained later, as things calmed down. “There’s a science to it. It’s very technical. There is a risk, but in the long run you should make money--and we do make money.”
Such sensitivity runs deep in a profession that recoils at the term “speculators.” “We are used as a scapegoat sometimes, and there’s no basis for it except that we’re easy targets,” said White, who spent most of the day talking on the telephone to oil companies, auto makers, Middle Eastern interests and other bank clients.
By noon, while the rest of Los Angeles was preparing for its lunchtime break, the traders’ day was winding down, in keeping with East Coast time. Things had been relatively slow. No advance word leaked about Baker’s scheduled speech before a Japanese group in New York. In addition, activity in Europe and Australia was winding down in anticipation of the four-day Easter weekend.
Good Day for Dollar
For the dollar, it had been a good, if inconclusive, day, with gains registered against the yen, the German mark, the French franc and Swiss franc.
And for Healy, who at one point estimated that he had dealt in roughly three-quarters of a billion dollars worth of currency, the day was a success as well. Boosted mainly by the Canadian dollar purchase the night before, he figured his daily profit for the bank at about $95,000.
“For a quiet market, I guess that’s not bad,” he said.
