Forex Margin Changes- Will it Force Some Unwinding of the US Dollar Carry Trade?

http://www.forexmicrolot.com/forex-margin-llc.html

http://blogs.fxstreet.com/francesc/category/nfa-new-requirements/


There were recent changes by the CFTC regarding margin requirements on certain Forex pairs. The links above are just a few briefs about when some of the changes are taking place. A few Forex brokers are instituting the changes starting next week, though from the info I've read, it is only required by the following week (Nov 30).

I haven't gathered whether this is just for retail forex brokers or how it affects institutional trading. However, raising margin requirements will require more capital to initiate trades.

I wonder if/how this will affect the carry trade dynamic on the US dollar. It will certainly limit the leverage abilities of a certain portion of that market. Also, from what I read, it will affect already open trades. So that may mean that trades that are already open, may have to be exited or halved to decrease the risk of margin induced liquidation if they haven't done so already.

Now, the more interesting question which I can't answer is why this change is taking place. 200:1 leverage ability in the Forex market has been commonplace for quite some time on the major currency pairs. So why change it now to 100:1? I wonder if in all the data the CFTC has regarding the positions in the market, if they have some reason to believe that a certain part of the market is over-leveraged and/or potentially dangerous in some way. I think it foolish to assume that all action taken by such organizations is for the greater good, however the fact that they are reducing leverage and speculative capacity, makes me wonder why and who is being "protected" and who benefits from the move.

I am not a forex expert. But the movement in the forex market over the last years seems to have behaved how even a novice expects. The Fed instituted Quantitative Easing and the US dollar has fallen steadily and dramatically since. Now the QE was supposed to be basically complete by October. So now that, at least temporarily, some of that dynamic is gone, and here we are seeing a new rule that will almost certainly force some liquidation of speculative positions against the US dollar. Looking at this as a novice I would expect that there may be an impetus for a substantial move up in the dollar just off these changing dynamics.