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Gold Standard Marks Its Unlikeliest Return With Islamic State

Posted on 31 August 2015 by VRS  |  Email |Print

The terrorist group known as ‘Islamic State’ claims to have launched a precious metals-based ‘currency’ and oil-for-gold trading practices in order to undermine the dollar’s dominance in international trade. Kristian Rouz — In yet another attempt to behave as if they were the government of a nation, the notorious terrorist group Islamic State has just reintroduced a warped version of the gold standard the way it existed a century ago.
With the announced ‘return of the gold dinar’, Islamic State seemingly hopes to provide substantial support to their black-market oil-based economy. Whilst the new ‘currency’ will hardy gain international convertibility, the move might have significant consequences for the global economy, one of them being larger and less predictable fluctuations in gold prices, as the scale of black market operations with precious metals is inevitably poised to grow………………………………………..Full Article: Source

Why the Islamic State wants to mint its own currency

Posted on 31 August 2015 by VRS  |  Email |Print

The Islamic state wants to mint its own currency for circulation in the areas it controls, as part of its bid to end US supremacy, according a video released this week. The new gold silver, and copper coins will deliver “the second blow to america’s financial system of enslavement casting into ruins their fraudulent dollar note,” according to the hour-long video entitled Return of the Gold Dinar by the group’s media wing al Hayat.
But the currency will have no value outside of the area controlled by group which straddles the Iraqi-Syrian border. And the Islamic State’s status as a terrorist organisation means anyone trading in the coins risks risk money-laundering or terrorism charges………………………………………..Full Article: Source

A Currency Drop is Inflationary, Right?

Posted on 31 August 2015 by VRS  |  Email |Print

The central banker’s task of keeping inflation just right has become a permanent tussle with the global currency markets. Too weak a currency equals too rapid price gains. Too strong, and disinflation looms.
That’s the well-worn argument under the microscope Friday at the Jackson Hole Symposium, the U.S. Federal Reserve’s annual policy getaway. Gita Gopinath, a scholar at Harvard University, says that it just isn’t that simple………………………………………..Full Article: Source

Sound Money To Prevent Currency Wars

Posted on 28 August 2015 by VRS  |  Email |Print

China devalued its currency, the resignation of the Greek prime minister revived doubts about the Euro, and the markets were expecting that in a few weeks the Federal Reserve was going to begin raising the interest rates. These three strikes—connected with monetary manipulations—was followed by a large decline in the stock market.
It is natural that those of us who follow economic policy will try to find connections. Those who champion central banks and government monetary manipulation argue that their goal is to bring stability. Those of us who argue that monetary bureaucrats continue to fail, see the current scene as providing another chance to point at their failures and as another opportunity to call for sound money………………………………………..Full Article: Source

The UK winners from China’s currency devaluation

Posted on 28 August 2015 by VRS  |  Email |Print

After years of pegging its currency to the dollar, China has taken the unexpected step of allowing its currency to depreciate. It is unclear exactly how much the renminbi will be allowed to fall, but there have been tangible consequences on global investments already.
In the UK, many companies banking on strong Chinese sales growth were shunned by investors. Luxury retailer Burberry fell more than 7% on the 3% slide in renminbi that started on 11 August, while consumables giant Unilever lost almost 5%………………………………………..Full Article: Source

Currency storms create investment opportunities

Posted on 27 August 2015 by VRS  |  Email |Print

The currency storm that has engulfed the emerging world has blown into other markets around the globe. It has put pressure on valuations, produced patches of illiquidity and, in some cases, is starting to spill over into the economic and policy spheres.
While these dislocations have caused investor pain and risk some accidents, they are also creating a few investment opportunities today and a lot more down the road. On the economic front, many emerging economies are being buffeted by that unpleasant mix of lower global demand and less favourable international prices………………………………………..Full Article: Source

Currency volatility upsets Asian growth plans

Posted on 27 August 2015 by VRS  |  Email |Print

Faced with falling exports and deflation risks, it suited much of Asia to let their currencies drift lower, until China’s abrupt devaluation triggered a tide of volatility that is upsetting not just their currency management but also their growth strategies. China’s 2 percent devaluation on Aug. 11 added to evidence that its economy was struggling, and overseas it caused a ripple of panic that a currency war was in the offing.
Currencies and stock markets in the region have since tumbled to multi-year lows, pulling global markets in their wake, as worries about China played into broader concerns about global growth, a collapse in commodity prices and the timing of a rise in U.S. interest rates………………………………………..Full Article: Source

How China’s Currency Policies Will Change the World

Posted on 27 August 2015 by VRS  |  Email |Print

The recent fluctuations in China’s currency typify the best and worst of a globalized world, where developments in one place can instantly change the political and financial calculations of governments in others. For most of human history, the communities, cultures and economies of the world existed independently of one another, separated as they were by vast distances and difficult terrain.
It would, for instance, take months or even years for news of China to reach Europe across the great Silk Road trading route during the height of its use some 1,000 years ago. Even then, the communities along that route could hardly be considered entirely coherent. But that is clearly no longer the case. And now, as China continues to adjust the yuan, markets throughout the world will react accordingly, even as they react differently………………………………………..Full Article: Source

Forget Dollar, Look at These European Currency ETFs

Posted on 26 August 2015 by VRS  |  Email |Print

Surprising many investors, the global currency market underwent a trend reversal lately. A dovish Fed, which is still in two minds about raising the key interest rates next month, and extreme tantrums from the Chinese market stoked global growth worries all over again.
The economic data points remained sturdy in the U.S.; but inflation is still short of the Fed’s longer-term target due to the free fall in energy prices last year and declining prices of non-energy related imports, per the Fed minute. The September timeline of the Fed lift-off now appears distant as subdued inflation shifted the speculative timeline to December………………………………………..Full Article: Source

Oil price drop leads to renewed speculation on Saudi riyal

Posted on 26 August 2015 by VRS  |  Email |Print

Plummeting oil prices have led to renewed speculation against the Saudi riyal, heaping pressure on Riyadh as it burns through its foreign reserves and taps domestic debt markets to make up for a widening budget deficit.
Saudi Arabia, along with other emerging markets, has been the target of traders’ bets that the oil-rich economy will eventually be forced into a devaluation as oil prices fall to new lows on a weaker demand outlook triggered by Chinese economic stress………………………………………..Full Article: Source

Currency war in China or market forces at work?

Posted on 26 August 2015 by VRS  |  Email |Print

We read many articles last week speculating as to the cause behind the Chinese government’s decision to devalue their currency, the renminbi or yuan. Almost everything that we have read revolves around some form of conspiracy theory, subtly implying that the Chinese government is setting forth its dastardly plan to wage a currency war against the rest of the world.
China, of course, has stated that they are simply allowing their currency to become more responsive to market forces. So which is it — all-out currency war or just market forces at work? Now let’s keep in mind there are only two methods for a government to directly control the value of its currency………………………………………..Full Article: Source

Investors Bet That Currency Pegs Will Come Under Strain

Posted on 26 August 2015 by VRS  |  Email |Print

With global markets thrown into a twist, some investors are betting that long-standing currency pegs might come under strain. Traders and investors said a buildup in bets against currency pegs in Hong Kong and Saudi Arabia accelerated after China’s central bank devalued its currency this month.
The wagers picked up further after Kazakhstan and Vietnam moved to free their exchange rates, too. “[Investors] are looking at who’s next,” said Cynthia Wong, head of Société Générale SA ’s emerging-market Asia fixed-income and currency trading in Hong Kong and Singapore………………………………………..Full Article: Source

Which Currencies Are Being Hit Hardest?

Posted on 25 August 2015 by VRS  |  Email |Print

Currencies were not exempt from the global market rout Monday. Emerging market currencies, especially those linked to economies heavily dependent on commodities, were caught in the market downdraft.
Australia’s dollar slid more than 2% against the U.S. dollar to levels last seen in 2009. Russia’s ruble slumped 3% to trade at around 71 against the dollar. South Africa’s rand was down nearly 2%, as U.S. markets opened, briefly hitting a record low of 14.48 against the dollar. The Canadian dollar and the Norwegian krone also weakened against the dollar………………………………………..Full Article: Source

South African currency hits record lows

Posted on 25 August 2015 by VRS  |  Email |Print

The prospects of rising interest rates in the United States, coupled with a downturn in the Chinese economy contributed to the South African currency’s record drop on Monday, said economists. The South African rand plunged to 14 rand to the dollar before recovering slightly to 13 rand as trade closed on the Johannesburg Stock Exchange.
The rand was the worst affected among 25 other emerging market currencies, buckling under China’s currency devaluation, reported Business Day, a financial newspaper. In the United States, the Dow Jones industrial average lost more than 1,000 points as trade began on Wall Street………………………………………..Full Article: Source

South African currency hits record lows

Posted on 25 August 2015 by VRS  |  Email |Print

The prospects of rising interest rates in the United States, coupled with a downturn in the Chinese economy contributed to the South African currency’s record drop on Monday, said economists. The South African rand plunged to 14 rand to the dollar before recovering slightly to 13 rand as trade closed on the Johannesburg Stock Exchange.
The rand was the worst affected among 25 other emerging market currencies, buckling under China’s currency devaluation, reported Business Day, a financial newspaper. In the United States, the Dow Jones industrial average lost more than 1,000 points as trade began on Wall Street………………………………………..Full Article: Source

Asia Should Call Truce on Currency War

Posted on 25 August 2015 by VRS  |  Email |Print

The Finance Secretary of the Philippines has a message for Asian policy makers tempted to follow China’s lead by devaluing their currencies: Don’t do it. “We must be mindful of the trade-offs involved in using the exchange rate as a trade tool to boost competitiveness,” Cesar Purisima said Sunday.
Chinese exchange-rate officials probably have a thing or two to say about trade-offs. Since its surprise devaluation on Aug. 11, Beijing has been struggling to keep the yuan from outright freefall. Yesterday, Shanghai stocks tumbled a further 8.5 percent. China perfectly encapsulates Purisima’s point: The short term benefits of a weaker currency pale in comparison to the costs………………………………………..Full Article: Source

Gold Industry Analysts Expect Price Boost From Currency War Fears

Posted on 24 August 2015 by VRS  |  Email |Print

Gold prices could rise above $1,200 an ounce in the next few months as fears of a currency war following the devaluation of the yuan make equity markets choppy, boosting physical gold and ETF buying, leading industry analysts said at a conference. The metal has already rebounded about 8 per cent from July’s 5-1/2 year low, boosted by minutes of the Federal Reserve’s last policy meeting that dented expectations for an imminent rise in US rates.
Spot prices hit a peak of $1,168.40 on Friday. “After the devaluation of the Chinese currency, people are worried,” said Rajan Venkatesh, head of India bullion at ScotiaMocatta, part of Canada’s Bank of Nova Scotia. “They are afraid of a currency war. They are going back to gold.”……………………………………….Full Article: Source

Oil-Nation Currency Pegs to Cave on Crude Rout, Kazakh PM Says

Posted on 24 August 2015 by VRS  |  Email |Print

The world is entering a “new era” of low oil prices that will sweep away currency pegs in crude-producing nations, according to the prime minister of Kazakhstan, which roiled markets this week with a surprise decision to abandon control of its exchange rate.
Central Asia’s biggest energy producer cut its currency loose on Thursday, triggering a 22 percent slide in the tenge to a record low versus the dollar. The move followed China’s shock devaluation of the yuan the week before, which drove down oil prices on concern global growth will stutter and nudged nations with managed exchange rates toward competitive devaluations of their own………………………………………..Full Article: Source

Did China just start currency war?

Posted on 24 August 2015 by VRS  |  Email |Print

Beijing’s depreciation of the yuan in mid-August has triggered a wave of copycat moves from other countries and falling values of currencies. Is this a new currency clash, or is each case specific? What happened in China?
In three consecutive days last week, the People’s Bank of China devalued the national currency, with a 4.4 percent overall depreciation. The step was intended to revive exports, but caused a domino effect leading to panic and fluctuations in equity markets around the globe………………………………………..Full Article: Source

Emerging-Market Currencies Battered by Commodities Slide, China Turbulence

Posted on 21 August 2015 by VRS  |  Email |Print

A whirl of global forces bore down on emerging-market currencies Thursday, as investors assessed the damage from the slide in commodities prices and concerns about China’s economy. The mood soured on currencies from South Africa’s rand to Kazakhstan’s tenge, with some forecasting the slide could get steeper.
“It’s a total carnage in commodity currencies,” said Piotr Matys, an emerging-markets analyst at Rabobank in London. Policy makers in many emerging-market countries are struggling to cope with several factors beyond their control that have combined to hit their currencies hard………………………………………..Full Article: Source

As China Devalues, India Must Protect Itself From a Currency War It Cannot Win

Posted on 21 August 2015 by VRS  |  Email |Print

The Chinese authorities made an exchange rate adjustment last week and the devaluation of its currency sent shivers across the world’s financial markets. China had been averaging an annual growth rate of more than 10% since 1980 but in recent years, that trend has faltered. In 2015, the growth rate is projected to decline to 6.8%. Its current account surplus declined to 2% in 2014 from a peak of 10% in 2007.
The latest IMF analysis—as of August 14 2015—suggests the Chinese economy is vulnerable to many factors; its augmented fiscal deficit is high at 10% of GDP while the country’s debt-to-GDP ratio has increased to 57%. ……………………………………….Full Article: Source

Yuan Devaluation Adds to Commodities Gloom

Posted on 20 August 2015 by VRS  |  Email |Print

Another great game is certainly afoot in global financial markets, and China has announced its presence with authority. The bout, of course, is the currency war. On August 11, China devalued its currency by the largest amount in one day since 1993. By doing so, it joined a phalanx of countries around the world that have actively depreciated their currencies against the U.S. dollar.
Markets have been roiling ever since. This is especially true for commodities, which are already in a weakened position. But all the drama seems to be a bit of an overreaction………………………………………..Full Article: Source

Kazakhstan and Vietnam weaken currencies

Posted on 20 August 2015 by VRS  |  Email |Print

Kazakhstan and Vietnam allowed their currencies to fall on Wednesday, fuelling expectations of further depreciations among emerging market countries that could trigger financial solvency problems. The dual impact of China’s renminbi devaluation — and worries about the country’s slowdown — along with anticipation of a US rate rise is weighing on currencies in emerging markets, already feeling the pain of falling commodity prices.
The tenge dropped 4.7 per cent, close to the upper limit of the new trading range set last month by the Kazakh central bank. The oil-dependent central Asian country, which trades heavily with Russia and China, is being buffeted by the fall in the rouble and crude prices………………………………………..Full Article: Source

What China’s currency devaluation means for the world’s trade deals

Posted on 20 August 2015 by VRS  |  Email |Print

With no international (or domestic) agreements on what constitutes currency manipulation, it’s time world leaders take action. With the sudden depreciation of China’s renminbi, it’s worth looking at the link between currency values and trade agreements. China’s currency last week dropped by a cumulative 4.4% against the U.S. dollar, making Chinese exports cheaper and imports into China more expensive by that amount.
The effect on trade can be substantial. With the U.S. average tariff on industrial goods well under 2%, this change in China’s currency value easily swamps most U.S. tariffs. And given the fact that the U.S. dollar was already strong, this move is an added disadvantage to U.S. exports headed for China compared to exports from other countries………………………………………..Full Article: Source

China Doubles Gold Buying, Yuan Devaluation the Big Focus for Bullion Gains

Posted on 18 August 2015 by VRS  |  Email |Print

Gold bullion rose near $1120 per ounce in London trade Friday, heading for only the second weekly rise in 8 as China followed this week’s Yuan devaluation by reporting additional gold reserves for the second time in a month. The Yuan rose slightly on the FX market, recouping a little of the week’s earlier 3.5% drop after the People’s Bank of China (PBoC) moved Tuesday to a ‘market determined’ reference rate for its currency.
Asian shares held flat, but Shanghai equities closed the week almost 6% higher from last Friday as China’s securities regulator said Beijing may reduce its recent intervention to support the market after this summer’s near 30% plunge. Eurozone stock markets fell again, with Germany’s Dax index dropping 4.5% for the week as the single currency extended its rise on the FX market………………………………………..Full Article: Source

China’s Currency Move Rattles African Economies

Posted on 18 August 2015 by VRS  |  Email |Print

The shock waves from China’s surprise yuan devaluation are ricocheting through African economies, sending currencies tumbling and stoking anxiety that the continent’s biggest trading partner might be losing its appetite for everything from oil to wine.
In South Africa, the rand hit a 14-year low of 12.94 to the dollar on Monday, extending a 2% drop since Aug. 10 and a 12% slide this year. Currencies in other African countries with close ties to China, like Angola’s kwanza and Zambia’s kwacha, are also down sharply after Beijing unexpectedly cut the yuan’s value by 2% against the dollar last Tuesday………………………………………..Full Article: Source

Currency war heating up for yen and euro

Posted on 18 August 2015 by VRS  |  Email |Print

Like frogs in a pot of water, European and Japanese policymakers face being trapped in rising temperatures caused by China’s dramatic renminbi devaluation. Beijing’s surprise move to weaken its currency is causing ripples across emerging markets and commodity-based currencies, amid worries about the impact on competition for exports, their equity markets and deflation.
So what of the big currencies? Although a rising dollar may give the Federal Reserve reason to delay raising rates next month, the US economy is seen by several currency strategists as sufficiently protected from the direct consequences of China’s devaluation………………………………………..Full Article: Source

Yuan Drop Leads India to Mull Steel Anti-Dumping Duties

Posted on 17 August 2015 by VRS  |  Email |Print

India said it’s being forced to consider steel safeguard duties and more anti-dumping curbs as the yuan’s devaluation threatens to stoke surging Chinese shipments. A steel import-tax increase earlier this month may not be enough of a deterrence, Financial Services Secretary Hasmukh Adhia said. Adhia has seen the steel industry contribute to elevated bad debt in India, in part as producers struggle to compete with imports from nations such as China and Russia.
“The global lack of demand in steel is so strong that one isn’t sure how, even after this recent increase, it’s going to help,” Adhia said in an interview on Sunday in New Delhi. “We’ll have to think about other options, whether safeguard duty and anti-dumping duty can also be used.”……………………………………….Full Article: Source

Yuan devaluation more likely to boost than hurt China commodity

Posted on 17 August 2015 by VRS  |  Email |Print

Yet the initial response from the Obama administration officials has been mild, even positive. “Greater exchange rate flexibility is important for China as it strives to give market forces a decisive role in the economy and is rapidly integrating into global financial markets”, the worldwide Monetary Fund said. They have urged China for years to switch to a market-based system but assumed that would cause the yuan to rise and help their own exporters.
“I think the yuan has become overvalued as other countries tried to cheapen their currencies and it will keep falling, playing catch-up”, he added. “Markets are taking fright at the recent move in the [yuan]”………………………………………..Full Article: Source

China does not want ‘currency war’ with west, says central bank economist

Posted on 17 August 2015 by VRS  |  Email |Print

China’s central bank has warned of further volatility in the yuan but reiterated that Beijing had no intention of sparking a “currency war” following a series of shock devaluations last week. The chief economist at the People’s Bank of China, Ma Jun, said the Chinese government had “no intention or need to participate in a currency war”.
In a concerted effort to play down fears of tit-for-tat devaluations with the US, Europe and Japan, he said Beijing would intervene only in exceptional circumstances to counteract excessive volatility………………………………………..Full Article: Source

Yuan Market Calms After Historic Currency Regime Shift

Posted on 17 August 2015 by VRS  |  Email |Print

China’s foreign-exchange market is stabilizing after a historical week that saw the biggest selloff in two decades and a move to a more market-driven currency regime. Here’s a look at where things stand after the volatile trading days.
The market exchange rate has converged with the official reference rate, or fixing, since Thursday after consistently trading more than 1 percent weaker in recent months. That suggests the policy adjustment may be achieving its goal and that there’s less likelihood of movements of similar magnitude going forward, according to RBC Capital Markets………………………………………..Full Article: Source

Copper steadies as slower yuan decline calms market

Posted on 14 August 2015 by VRS  |  Email |Print

Copper steadied on Thursday above the previous session’s six-year low after China’s central bank said there was no basis for further yuan depreciation, dampening concerns that the country’s appetite for metals imports could wane.
Weighing on base metals, however, was a stronger dollar, which makes dollar-priced metals costlier for non-U.S. investors. Three-month copper on the London Metal Exchange gained as much as 1.2 percent to an intraday high of $5,253 a tonne. It failed to trade in closing open outcry activity and was last bid down 0.1 percent at $5,184.50………………………………………..Full Article: Source

Currency-Hedged ETFs Soften Blow of Dollar’s Rise

Posted on 14 August 2015 by VRS  |  Email |Print

Investors are pouring billions of dollars into a fashionable corner of one of the fastest-growing areas on Wall Street: exchange-traded funds that aim to protect investors against the return-crimping impact of a rising dollar.
Currency-hedged funds aim to help investors to invest in assets outside of the U.S., such as European stocks, a popular goal at a time many advisers are counseling clients to diversity their holdings. ETFs typically track an index or other basket of assets, and trade on an exchange, offering investors the ability to buy and sell it like a stock………………………………………..Full Article: Source

China Fires the First Shot in a Currency War

Posted on 14 August 2015 by VRS  |  Email |Print

In recent years, Japan, the U.S. and Europe have been accused of fomenting currency war by employing monetary stimulus that drove down their currencies. These accusations were off base: by boosting domestic spending with easier monetary policy, everyone, including their trading partners, benefited.
But China’s move this week to devalue the yuan is an exception. Because its action was not part of a broader monetary boost, the effect will be to siphon demand from its trading partners while giving nothing in return. It is a zero-sum game and thus the first shot in a currency war………………………………………..Full Article: Source

Chinese currency devaluation, explained

Posted on 14 August 2015 by VRS  |  Email |Print

This week the Chinese government has allowed its currency, the yuan, to decline in value by about 4 percent against the US dollar. The move has renewed a long-simmering debate about China’s exchange rate and whether a cheap yuan will be harmful to the US economy.
In the wake of the 2008 financial crisis, critics faulted the Chinese government for intervening in the market to make its currency artificially cheap. A cheap yuan gave Chinese exporters an advantage in world markets, which critics said was harming US businesses………………………………………..Full Article: Source

Lessons for China from past currency peg mistakes

Posted on 14 August 2015 by VRS  |  Email |Print

With the US Federal Reserve’s first rate rise approaching, China’s belated decision to allow the renminbi to depreciate bears hallmarks of the Swiss National Bank’s pre-emptive reaction to European quantitative easing in January. The lessons from other discarded currency pegs loom large.
The lesson from Asia and Latin America in the 1990s was that currency pegs reinforced and indeed exacerbated financial cycles. Asset prices tended to overshoot on the upside, creating macro imbalances that were eventually corrected through catastrophic devaluations………………………………………..Full Article: Source

China’s yuan devaluation spells trouble for these commodities

Posted on 13 August 2015 by VRS  |  Email |Print

China is the world’s largest consumer of commodities and, when it comes to metals, is the largest producer of many, as well. So the country’s surprise decision to devalue the yuan by around 1.9% versus the dollar sent shock waves through commodity markets Tuesday. Analysts at Macquarie offered up a concise explanation for what happened:
“Assume that the metal price in U.S. dollars is constant, then a fall in the yuan against the dollar increases the yuan price of that metal. This should encourage Chinese producers to produce more of the metal, and Chinese consumers to consume less of it,” they said, in a note. “This will mean China needs to import less of the metal (or if it is an exporter, it can export more of metal). This should lower the ‘world price’, i.e. the U.S. dollar price.”……………………………………….Full Article: Source

Gold Prices Rise; Safe Haven From Yuan’s Turbulence

Posted on 13 August 2015 by VRS  |  Email |Print

Gold prices rose to their highest level in about three weeks Wednesday, as investors fled to the safe-haven metal after China’s devaluation roiled markets. Gold for December delivery, the most actively traded contract, closed up 1.4% to $1,123.60 a troy ounce on the Comex division of the New York Mercantile Exchange, its highest level since July 20.
Concerns about China’s economy on Wednesday sent shock waves through currency markets and pulled stocks sharply down around the globe. The yuan fell by as much as 1.98%, adding to Tuesday’s move to weaken the currency by almost 2%………………………………………..Full Article: Source

Why Beijing isn’t starting a currency war

Posted on 13 August 2015 by VRS  |  Email |Print

If the Peoples’ Bank of China startled global financial markets on Tuesday this week when it unexpectedly loosened its grip on the value of the Chinese currency, Wednesday’s further, unanticipated slide in the renminbi was all the more of a shock to many.
The renminbi or yuan, as it’s more commonly known, had already taken its biggest one day drop in a decade on Tuesday following a move the Peoples’ Bank of China (PBOC) had described as a one-off adjustment to the way it calculates its daily “fix” for the renminbi exchange rate. What only became clear on Wednesday was that the system change will make the renminbi more volatile and, for now, more likely to fall than to rise………………………………………..Full Article: Source

Commodity Currencies Fall As Yuan Slumps Yet Again

Posted on 13 August 2015 by VRS  |  Email |Print

Commodity currencies such as the Australian, the New Zealand and the Canadian dollars continued to be weak against their major currencies in the Asian session on Wednesday, as the yuan slumped for the second straight day following Tuesday’s devaluation by the Chinese central bank.
The People’s Bank of China on Wednesday set its reference rate at 6.3306 per dollar, up slightly from Tuesday’s close but 1.6% lower than the previous day’s fixing rate. The central bank devalued the yuan by 1.9% on Tuesday. The devaluation of the yuan has fueled worries about slowing growth in the world’s second-largest economy………………………………………..Full Article: Source

Commodities crumble on China devaluation

Posted on 12 August 2015 by VRS  |  Email |Print

Commodities from metals to oil fell on Tuesday after China devalued its currency, renewing concerns about growth in the world’s largest consumer of raw materials. Copper fell 4 per cent to a six-year low of $5,114 a tonne, after a brief rally last week. Brent crude, the benchmark oil price, fell almost 3 per cent, back below $50 a barrel, after rallying almost 4 per cent in the previous session.
Metals have been hit by weaker demand in China and continued supply from miners, which have benefited from low energy costs and a stronger dollar. Copper prices are down 21 per cent since their peak this year in May………………………………………..Full Article: Source

With Yuan Devaluation, China Digs a Hole for Commodities

Posted on 12 August 2015 by VRS  |  Email |Print

China’s appetite for commodities from gold to crude oil to copper is likely to be hurt in the near term after the country’s surprise decision to devalue its currency. Most commodities are priced in dollars, so a weaker yuan will raise the cost of imports for buyers in China, weighing on demand.
Given China’s role as a huge buyer of global commodities—it consumes nearly half of the world’s annual output of metals, for instance—any drop in demand there is likely to put further downward pressure on resource prices, many of which are already at multiyear lows. “In the short run, this [devaluation] is more bad news for commodity prices. A weaker Chinese currency is likely to mean weaker demand for internationally produced commodities,” said Paul Bloxham, chief economist for Australia and New Zealand at HSBC………………………………………..Full Article: Source

Weaker Yuan Wallops Commodities as Importers to Face Higher Cost

Posted on 12 August 2015 by VRS  |  Email |Print

The devalued yuan is dealing another blow to commodities. Oil and industrial metals fell amid speculation the weaker Chinese currency will hurt demand by making dollar-denominated imports more expensive. The Bloomberg Commodity Index retreated as much as 2 percent on Tuesday after the People’s Bank of China cut its daily reference rate for the yuan by a record 1.9 percent, triggering the currency’s biggest one-day loss since 1994.
Commodities investors were already concerned that demand was slowing in China, the world’s biggest consumer of energy, metals and grains. But the government’s unexpected latest effort to bolster the economy, by cutting the daily reference rate for the yuan by a record, could make matters worse for imports of raw materials………………………………………..Full Article: Source

China’s surprise currency devaluation sends commodities plunging: ‘Another sign of economic weakness’

Posted on 12 August 2015 by VRS  |  Email |Print

The last time China imposed extreme economic stimulus measures they drove huge gains in commodity prices. But this time, they’re just making things worse. Commodities plunged to new multi-year lows on Tuesday after China’s surprise move to de-value its currency by nearly two per cent. Oil and copper both dropped to their lowest levels since 2009. Zinc fell as much as four per cent, and nickel and aluminum were down as well.
The drop in commodities underscores the fact that investors have deep-seated concerns about China’s shrinking growth, and the government’s ability to stem the slowdown. China is the world’s primary driver of commodity demand, and its recent equity market meltdown and disappointing economic data have been rattling commodity markets for weeks………………………………………..Full Article: Source

China’s Yuan Move Undercuts Oil

Posted on 12 August 2015 by VRS  |  Email |Print

China’s move to weaken the yuan is the next shoe to drop in the oil market. Unlike the earlier ones—resilient U.S. shale output and OPEC’s frantic pumping—this one is all about demand. A weaker yuan is bad news for oil bulls on two fronts. First, the surprise move, coming after the summer’s debacle in the Chinese stock market, suggests Beijing is worried about capital flight offsetting efforts to stimulate a weakening economy.
Given that the International Energy Agency expects China to account for 23% of the growth in global oil consumption this year, any anxieties about it hurts sentiment. Then there is the direct effect of a weaker currency, which raises the domestic price of oil (subsidies often distort pump prices but the bill ultimately falls due at some level in the economy.)……………………………………….Full Article: Source

Yuan devaluation raises currency war anxiety

Posted on 12 August 2015 by VRS  |  Email |Print

The anxiety level about a fresh round of worldwide currency skirmishes just went up by a notch. The trigger this time is a surprise, near-2 percent devaluation of the Chinese yuan against the U.S. dollar. The People’s Bank of China downplayed the move as a “one-time correction” and a shift to make the currency’s value more sensitive to supply and demand.
But the mainland’s deflating economy raises the risk of a more sustained campaign of yuan debasement, followed by tit-for-tat moves by other countries. As a one-off, the 1.8 percent depreciation in the PBOC’s daily fixing rate against the U.S. dollar will do very little to boost the competitiveness of Chinese-made goods – or put exporters in other countries at peril. In inflation-adjusted terms, the yuan has strengthened by 44 percent against its trading partners’ currencies since the end of 2007………………………………………..Full Article: Source

Why China’s yuan devaluation is good for Treasury investors

Posted on 12 August 2015 by VRS  |  Email |Print

Demand for long-term Treasury bonds has been rising over the past four weeks, as an overarching flight-to-safety theme has emerged out of the global rout in commodities sparked in part by worries about a slowdown in China’s economy. A surprise devaluation of the Chinese yuan by the People’s Bank of China enhanced the flight-to-safety theme on Tuesday and sparked further demand for long-term Treasury bonds.
A broader strategy is emerging, where Treasury investors have been moving money from short-term to long-term Treasury bonds causing a phenomenon that is known as a “flattening yield curve.” “Most [Treasury investors] seem to be playing the curve flattening strategy ahead of the Fed’s September meeting,” Tom di Galoma, head of rates and credit trading at ED & F Man Capital Markets, said in a note………………………………………..Full Article: Source

5 ways China’s devaluation could shake up the markets

Posted on 12 August 2015 by VRS  |  Email |Print

Markets are buzzing about the Chinese government’s surprise decision to devalue their currency, known as the yuan, leading to a 2 percent drop in the yuan’s value in Tuesday trading, the largest one-day decline ever. The question is, what does it mean?
The markets—all of the markets—supplied some preliminary answers almost immediately. 1. It gives the Federal Reserve another reason to delay raising interest rates. The yield on benchmark 10-year Treasuries fell more than 5 percent in U.S. trading today, moving down to 2.12 percent in early afternoon. So the most immediate practical impact of China’s move in the U.S. may be that mortgage rates stay lower for longer…………………………………………Full Article: Source

Cheaper Chinese Currency Has Global Impact

Posted on 12 August 2015 by VRS  |  Email |Print

Beijing signaled with its currency devaluation that the domestic economic slowdown it has failed to reverse is no longer a problem confined within China’s borders. It is now the world’s problem, too. Chinese officials have cut interest rates four times in the past 12 months, increased the amount of money banks can lend out and pumped funds into the stock market—measures meant to boost domestic demand in the world’s second-largest economy.
By devaluating the yuan, Chinese authorities are turning to a controversial growth-boosting tactic whose effects by their nature reverberate far and wide. A cheaper yuan could help boost Chinese exports. It also might complicate the Federal Reserve’s decision about when to start raising U.S. interest rates………………………………………..Full Article: Source

Australian dollar follows commodities currencies higher, as US dollar weakens

Posted on 11 August 2015 by VRS  |  Email |Print

The US dollar fell from almost a four-month high as commodities from crude oil and gas to copper and gold rebounded from their worst month in four years. The greenback slipped a third day, its longest streak of losses in two months, even as central-bank officials struck a positive tone on progress in the US economy, as traders assessed whether the Federal Reserve will raise interest rates next month. Currencies of commodity-producing nations pared losses.
“The greenback is giving back some of its gains from last week,” Minh Trang, a senior foreign-exchange trader at Silicon Valley Bank in Santa Clara, California, said by e-mail. “We had a bounce in commodity prices and a strong showing in Chinese equities overnight. That certainly was a factor.”……………………………………….Full Article: Source

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