eFinancialCareers

A career for world news junkies.

In the world of finance, FX (or foreign exchange) is a hugely important, highly charged area. It is all about predicting the likelihood of one currency falling (depreciating) or rising (appreciating) against another. If a depreciation is deemed likely, the bank will advise its clients to sell and will itself sell that currency and buy one that’s appreciating. To complicate, many products traded on the foreign exchange markets are not actual currencies, but bets on the future direction of foreign exchange price movements, or so-called futures.

Trends

If you work in the world of foreign exchange, the big news for some years has been the dollar – when, and by how much, will it decline? But not everyone is pessimistic – there’s a school of thought that the US economy is so productive and innovative that its currency may have become undervalued.

The other big news is carry trades. These occur when investors borrow money in currencies with low interest rates (e.g. the Japanese yen) and invest in currencies with higher interest rates (e.g. sterling). Because yen are sold on the open market during these trades, it’s argued that the value of the yen has been kept artificially low.

Key players

If US banks dominate M&A activity, European banks rule the foreign exchange trading roost. In 2006 all but one of the five top players (Citi) originated in Europe.

Roles and career paths

Roles in foreign exchange are similar to those in sales, trading and research, except that you will be trading currencies and their derivatives. FX trading jobs are usually split between ‘vanilla’ trading, where products are simple and trades are easy to execute, and more complex ‘exotic’ derivatives trading. As in other product areas, sales jobs in FX are usually divided between different client types, with some sales people specialising in hedge funds, while others may only sell to companies.

FX researchers produce reports that are used by sales people to keep clients informed of what’s happening in the FX markets. FX structurers assemble complex exotic derivative products for clients.

Pay

Top foreign exchange traders can make a packet – particularly if they work with derivative products. According to headhunter Napier Scott, managing directors trading exotic foreign exchange options can make more than £1m. But you won’t make as much as this if you work with vanilla products, where the maximum is a mere £700k.

Skills

“Successful foreign exchange professionals need to thrive on action, markets and informed risk-taking,” says Vincent DeLorenzo, EMEA head of FX at Bank of America.

“You should be comfortable with probability concepts and be able to analyse macroeconomic data and events accurately and quickly,” he adds.

A highly maths-focused degree, particularly pure maths, is a must, whether at undergraduate or postgraduate level, agrees Simon Head, executive director of Akamai Financial Markets. “You need to be able to see numbers and be very hot on numerical analysis. But at the same you need to be a very confident, polished and articulate sales person,” he says.