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Roiling Markets Are the Final Arbiter of Value for World's Currencies : Finance: $880 billion is traded daily in the frenzied realm of foreign exchange--and always at warp speed.


LONDON — It was over in seconds. Faster than you could say "$10 million," the young foreign-exchange dealer had bought that much cash from a large London-based bank in return for 15,595,000 German marks. Like a school kid calling friends off a fly ball headed his way, he had pounced on the bank's offer with a single word: "Mine!"

It was not his for long.

Ten seconds of telephone time later, he had a buyer willing to pay 15,600,000 marks for his $10 million, and it was gone.

He had 5,000 more marks (about $3,200) in his pocket than he had when he started. Not a bad profit for 10 seconds' work.

By foreign-exchange standards, the deal was modest--little more than pocket change in a global market that at last count traded a staggering $880 billion each day.

The speed was also routine. "It's a fast-moving market," noted David Sumners, who heads a foreign-exchange trading team of 36 professionals at Morgan Stanley & Co. International Ltd. "Positions can change in seconds."

The American-owned securities firm and investment bank is one of several global players that buy and sell the world's leading currencies each day. They do so either for their customers (mainly major international companies and other banks), for their own needs or simply for profit.

Although currency movements generally reflect the market's judgment of government policy, they can also be spooked by rumor or intangibles such as the health or popularity of a national leader.

For better or for worse, it is the battalions of dealers deployed mainly in London, Tokyo and New York, but also in several other cities from Hong Kong to Zurich, who decide how much an American tourist will get for dollars in Paris, whether the Italian lira will recover its value and whether the Japanese yen will continue to increase in worth against all comers.

Today, the markets, not governments, decide. Their sheer size makes them the final arbiter of a currency's value.

It wasn't always so. It was only in the 1970s, when revolutions in computer, communication and information technologies coincided with the end of foreign-exchange controls in many countries, that the market took off in its present form.

Those forces propelled the business of changing money from a sleepy bank window service for travelers and world traders to an intense, high-tech, 24-hour operation in which dealers often decide in seconds whether to buy, sell or hold massive amounts of foreign currencies.

The typical trader's desk at Morgan Stanley looks more like an aircraft cockpit than a banker's office.

Tom Viveash, the bank's chief spot trader in London, is surrounded by five TV monitors, four phone banks (each with 10 lines), two computer keyboards and a microphone. Bolted to the ceiling a few feet away, a large video screen displays current prices of Spanish, German, French and Italian government bonds plus the 11 latest major news flashes from around the world.

Primed with this up-to-the-minute market information and an endless supply of more in-depth market analyses, Viveash and his team make the choices that can make or lose barrels of money in practically no time at all.

Dealers here freely admit that their lives border on the obsessive. Long, relentless weeks that begin late Sunday (when the Far Eastern markets open Monday morning local time) and end late Friday (when New York finally closes) often make for short careers.

At 45, Viveash defies the stereotype of the brash young dealer who lives on adrenaline, deals on instinct and burns out at 35. As the market becomes increasingly sophisticated, daring alone is not enough. The best mix for a dealer, he says, is a bright, analytical mind, enough knowledge and confidence to know when to strike and the discipline to know when to let go of a tactic that's not working.

"The trick is anticipation," Viveash said. "When the market turns, it turns quickly."

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