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Currency turmoil casts doubt on forex pegs

Posted on 12 February 2016 by VRS  |  Email |Print

Market turmoil often radiates from currencies and showdowns between central banks and aggressive investors. A burning question early in 2016 is how long countries such as China, Saudi Arabia and others can continue to rely on currency reserves to spare their currencies from a pronounced drop in value.
As the global economy shows further signs of weakening and the collapse in commodity prices has punctured the budgets of many countries, investors are betting on much weaker currencies and the end of the Saudi peg to the dollar………………………………………..Full Article: Source

China’s Currency Will Diminish Dollar’s Role in International Trade

Posted on 12 February 2016 by VRS  |  Email |Print

The Chinese government has taken steps to promote the international use of its currency, the renminbi, which will diminish the dollar’s role in international trade, according to a report from the Brookings Institution. The steps China has taken to internationalize the renminbi have been gaining traction and the currency now represents the fifth-most important payment currency in the world.
“The Chinese renminbi, barely visible in international trade of financial flows just three years ago, appears to be blossoming,” says William Wilson, a research fellow at the Heritage Foundation. “China is now the world’s largest trading nation, and more corporations, particularly in Asia, are beginning to invoice their business in [renminbi].”……………………………………….Full Article: Source

Commodity Currencies Fall Amid Rising Risk Aversion

Posted on 11 February 2016 by VRS  |  Email |Print

Commodity currencies such as the Australian, the New Zealand and the Canadian dollars weakened against their major counterparts in the Asian session on Wednesday amid rising risk aversion, as worries about global economic growth continued to weigh on investor sentiment.
Concerns about the health of European banks and the volatility in crude oil prices as well as other commodity prices have increased risk aversion. Traders also look ahead to Fed Chair Janet Yellen’s testimony before the House Financial Services Committee later in the day. Yellen will be grilled on Capitol Hill about the condition of the U.S. economy and outlook for interest rates………………………………………..Full Article: Source

Janet Yellen quietly wages currency war

Posted on 11 February 2016 by VRS  |  Email |Print

Janet Yellen, the head of the US Federal Reserve, has decided that a “passive-aggressive” stance works best when it comes to fighting global currency wars. Unlike her two main counterparts – Mario Draghi, president of the European Central Bank (ECB) and Haruhiko Kuroda, governor of the Bank of Japan – Yellen is eschewing aggressive acts of hostility – such as negative interest rates.
Instead, she pays lip service to the idea of higher US interest rates, while lamenting that the stronger US dollar is causing financial conditions to tighten, which might force the US central bank to postpone its plans for hiking rates………………………………………..Full Article: Source

China can use capital controls to fix its currency problem

Posted on 11 February 2016 by VRS  |  Email |Print

For months, China’s exchange-rate policy has been roiling global financial markets. More precisely, confusion about that policy has been roiling the markets. Chinese officials have done a poor job communicating their intentions, encouraging the belief that they don’t know what they’re doing.
But criticising Chinese policy is easier than offering constructive advice. The fact is that China’s government no longer has any good options. No question, the country would be better off with a more flexible exchange rate that eliminated one-way bets for speculators and acted as an economic shock absorber………………………………………..Full Article: Source

The World Economy in Five Currency Trades

Posted on 10 February 2016 by VRS  |  Email |Print

Abenomics, the economic reform authored by Japan’s Prime Minister Shinzo Abe, is composed of three parts. So far, easing monetary policy has been the only effective weapon of the trio, and now even this under threat.
For the last three years, the yen has devalued dramatically against the Chinese renminbi, falling from highs of 0.08 yuan per yen to just 0.05 at the start 2015. It’s been an aid to noncompetitive Japanese exports and also increased terms of trade with China; the trade that contributes 13% more to GDP than Japanese trade with the United States………………………………………..Full Article: Source

Is Yen in Intervention Territory?

Posted on 10 February 2016 by VRS  |  Email |Print

Markets are falling and the Yen is rising. Since the beginning of the month the Japanese Yen is up more than 5% against the U.S. dollar. The Yen is a funding currency and it is falling hard as investors bail out of risky trades. In fewer than 7 trading days, USD/JPY has fallen 700 pips and it is not because the market is optimistic on Japan’s economy.
In fact, Yen strength comes at significant costs for Japan because as an export dependent nation, many Japanese industries live and die by the value of the Yen. While smart corporations hedge Yen risk, they are slow to do so and can only hedge a certain percentage of yen gains. So Yen strength hurts corporate profitability and in turn the economy………………………………………..Full Article: Source

Global currency collapse: Winners and losers

Posted on 09 February 2016 by VRS  |  Email |Print

Russia’s ruble and Mexico’s peso recently hit all-time lows against the dollar. The currencies of Colombia, Argentina and Brazil are all down 28% or more in the past 12 months. Turkey and South Africa have also fallen by double digits over that time.
Weak currencies are often a sign of an economic slowdown. China posted its worst growth last year in a quarter century, and Brazil is in its longest recession since the 1930s. These huge currency shifts have also created opportunities and challenges………………………………………..Full Article: Source

Why is so much money leaving China?

Posted on 09 February 2016 by VRS  |  Email |Print

Money is leaving China at an unprecedented rate. An increasing number of wealthy Chinese individuals and firms are trying to get their money out of the world’s second biggest economy as growth slows to its lowest level in a quarter of a century.
China has enormous foreign currency reserves. Should we even be worried that they are shrinking? China is flush with foreign currency. By the latest count, the nation’s cash pile still amounts to around US$3.2 trillion, the largest reserve in the world. But the cash mountain is declining fast and that has markets worried………………………………………..Full Article: Source

Protect Yourself from China’s Currency Contagion

Posted on 08 February 2016 by VRS  |  Email |Print

Mainstream economists and media pundits have been telling people that problems in China are unlikely to cause serious problems in the United States. They point to the fact that China only accounts for a small percentage of U.S. trade, for example, and that the falling Chinese stock market has very little to do with our stock market. Unfortunately, they are missing the point.
China is now to the rest of the world what the U.S. housing market was before the 2008 financial crisis – it is the epicenter of global instability. And at the very heart of that instability lies the yuan………………………………………..Full Article: Source

Currency War Escalation: Iran Wants Euros Instead of US Dollars for Oil Payments

Posted on 08 February 2016 by VRS  |  Email |Print

Washington must be getting nervous with the latest announcement from Iran’s state-owned oil company, the National Iranian Oil CO (NIOC) which declared that Iran will replace US dollars with Euros for its oil trades according to a Reuter’s news article titled ‘Exclusive: Iran wants euro payment for new and outstanding oil sales – source’.
Iran wants something (well almost anything) to bypass the US dollar with other currencies because of Washington’s willingness to impose sanctions whenever it wants on the Iranian republic………………………………………..Full Article: Source

Who’s Winning the Global Currency War? Not the ECB

Posted on 05 February 2016 by VRS  |  Email |Print

The euro is now at its highest level in over a year, and this has to be more bad news for Mario Draghi. The European Central Bank’s own calculation of the single currency’s effective exchange rate against a trade-weighted basket of 38 other currencies stood at 119.9056 on Thursday. That means that the real-world value of the euro has risen faster than the more commonly tracked exchange rate against the dollar.
Trade-weighted, the euro is at the highest level since Jan. 2, 2015, about three weeks before the ECB president officially announced his quantitative-easing program. Just measured against the greenback, the single currency is at its highest level in more than three months………………………………………..Full Article: Source

Saudi currency devaluation would carry major political risk

Posted on 05 February 2016 by VRS  |  Email |Print

A devaluation of Saudi Arabia’s currency could cause such political instability that Riyadh has little choice but to stick to its promise to use vast foreign exchange reserves to defend the riyal’s 30-year-old peg to the U.S. dollar.
Currency traders have been betting against the Saudi peg, and those of other regional oil producers, in the wake of oil’s price collapse. Societe Generale said on Thursday it saw at least a 25 percent chance of a near-term devaluation or 40 percent if oil prices stay at current levels throughout 2016. But in Saudi Arabia’s largely dollar-denominated economy breaking the peg would immediately raise the price of goods, hitting living standards………………………………………..Full Article: Source

UBS launches 8 currency-hedged smart beta ETFs

Posted on 04 February 2016 by VRS  |  Email |Print

UBS Asset Management has launched eight GBP-hedged smart beta ETFs as it sees currency playing a bigger part in returns. The launches will give investors access to factor-based exposures in the US and Europe, but with results hedged back to the pound. UBS says.
“Currency fluctuations can have a major impact on investment returns with more proactive global monetary policy exacerbating currency volatility in recent years,” says UBS………………………………………..Full Article: Source

EC wants to crack down on virtual currency exchanges

Posted on 04 February 2016 by VRS  |  Email |Print

The European Commission (EC) has announced its desire to crack down on the anonymous crypto-currencies. In a recent “action plan for strengthening the fight against terrorist financing”, the EC state its desire to staunch the flow of illicit funds into the hands of terrorists.
This follows on from the European Agenda on Security which highlighted the need to attack terrorist financing. The Action Plan among other things wants to pursue the disruption of “sources of revenue of terrorist organisations, by targeting their capacity to raise funds in the first place”………………………………………..Full Article: Source

Betting against China’s currency

Posted on 04 February 2016 by VRS  |  Email |Print

There are increasing signs of an economic slowdown in China, with pundits wondering whether this may prompt the government to let the national currency drop even further. Big hedge funds are already placing bets on this.
The Chinese economy has experienced a bumpy start in 2016. Trading on the country’s stock market had been suspended twice to prevent markets from panicking, and the value of the national currency, the yuan (also called renminbi), dropped to a five-year low against the US dollar………………………………………..Full Article: Source

Commodities-Linked Currencies Fall Versus Dollar, Yen

Posted on 03 February 2016 by VRS  |  Email |Print

Investors sold commodities-linked currencies and bought the Japanese yen and the dollar as lower oil and stock prices led to a reduced appetite for risk. The yen and the dollar gained ground against currencies from Australia, New Zealand, Canada, Brazil, Russia and South Africa. U.S. government bonds, another haven market, posted a strong price gain as well.
Investors’ sentiment on the global growth outlook has been jolted since the start of the year amid a big decline in global stocks and oil. The market turmoil has raised speculation of more monetary stimulus from major central banks to soothe market nerves………………………………………..Full Article: Source

Investors wise to keep eye on Chinese currency moves

Posted on 03 February 2016 by VRS  |  Email |Print

Investing used to seem a lot easier. One could simply select a handful of high quality local businesses that had attractive future prospects and appeared undervalued. Today, in a far more interconnected or “globalised” world, investors need to consider the consequences of many more factors on their portfolios.
There has been a lot of talk about the Chinese economy for many years now. A decade ago, it was all about its roaring growth and the positive effect that was having on supporting nations, like Australia………………………………………..Full Article: Source

Currency traders struggle to turn volatility into profit

Posted on 03 February 2016 by VRS  |  Email |Print

Currency traders are getting whiplash from the pile-up of policy surprises that have come their way in the past six months. And because the big events have been unexpected, they’re struggling to translate rising volatility into bigger profits.
The Bank of Japan’s decision to adopt negative interest rates, a week after governor Haruhiko Kuroda said they weren’t being considered, was the latest jolt. The yen’s 1.9-per-cent drop after the move was its biggest in more than a year, yet it paled in comparison to the euro’s 3.1-per-cent surge when the European Central Bank failed to impress with its December stimulus boost. China has switched policy several times since it devalued the yuan in August………………………………………..Full Article: Source

Yuan Devaluation Will Lower Commodity Prices

Posted on 02 February 2016 by VRS  |  Email |Print

A depreciation of 1 per cent in the Chinese yuan leads to a decline of 0.6 per cent in commodity prices, according to Bank of America. This relationship with the currency is the strongest for commodities such as copper and platinum, of which China is the world’s dominant consumer, the US bank’s strategists wrote in a report dated January 25.
A cheaper yuan will erode the purchasing power of the Chinese, pushing prices down and outweighing any benefit from easier financial conditions that a devaluation may bring, they said. Bank of America analysts compared the moves on the Bloomberg Commodity Index with the yuan’s changes against the US dollar and a basket of other currencies to calculate the so-called beta, which measures one security’s sensitivity to another……………………………………….Full Article: Source

How Australia has come out on top in this currency war

Posted on 02 February 2016 by VRS  |  Email |Print

The Australian dollar’s plunge to a seven-year low is turning out to be a blessing as China steers its slowing economy away from the heavy industries that helped fuel the country’s mining boom.
It’s more than four years since a record-high Aussie threatened to destroy manufacturing and hamstring the economy. Instead, the currency’s steepest three-year slide since it was floated in 1983 is working its magic — a weaker local dollar has spurred record tourist arrivals and education income. And it’s tempered the drag from iron ore’s plunge to unprecedented lows while making the nation home to the world’s lowest-cost miners………………………………………..Full Article: Source

Yen’s status as a haven currency will endure, despite declines

Posted on 02 February 2016 by VRS  |  Email |Print

Many market strategists expect the yen to weaken against the dollar in the near term following Friday’s announcement from the Bank of Japan. But any sustained weakness won’t diminish the Japanese currency’s role as a haven.
The yen has surrendered nearly all of its gains against the dollar from the past six weeks since the BOJ revealed on Friday that it would soon begin charging an interest rate of minus 0.1% on new excess reserves held at the central bank………………………………………..Full Article: Source

Currency War: U.S. Hedge Funds Mount New Attacks on China’s Yuan

Posted on 01 February 2016 by VRS  |  Email |Print

Some of the biggest names in the hedge-fund industry are piling up bets against China’s currency, setting up a showdown between Wall Street and the leaders of the world’s second-largest economy. Kyle Bass’s Hayman Capital Management has sold off the bulk of its investments in stocks, commodities and bonds so it can focus on shorting Asian currencies, including the yuan and the Hong Kong dollar.
It is the biggest concentrated wager that the Dallas-based firm has made since its profitable bet years ago against the U.S. housing market. About 85% of Hayman Capital’s portfolio is now invested in trades that are expected to pay off if the yuan and Hong Kong dollar depreciate over the next three years—a bet with billions of dollars on the line, including borrowed money………………………………………..Full Article: Source

Return of the currency crash

Posted on 01 February 2016 by VRS  |  Email |Print

Currency-market volatility has been around for decades, if not centuries. Wide gyrations in exchange rates became a staple of international financial markets after the Bretton Woods system broke down in the early 1970s, and mega-depreciations were commonplace later in the decade and through much of the 1980s, when inflation raged across much of the world.
And then, suddenly, calm prevailed. Excluding the mayhem associated with the global financial crisis of late 2008 and early 2009, currency crashes were few and far between from 2004 to 2014. But recent developments suggest that the dearth of currency crashes during that decade may be remembered as the exception that proves the rule………………………………………..Full Article: Source

China vows not to embark on a major currency devaluation

Posted on 01 February 2016 by VRS  |  Email |Print

China is unlikely to embark on a major currency devaluation, despite Japan’s move to impose negative interest rates, according to a government-linked economist, even though pressure is mounting from record capital outflows and fears the economy is slowing faster than expected.
The surprise move by the Bank of Japan on Friday has added another layer of uncertainty to global financial markets and pushed European bonds yields to a record low over the weekend, while reducing the likelihood of a March interest rate hike by the United States Federal Reserve………………………………………..Full Article: Source

The Return of the Currency Crash

Posted on 29 January 2016 by VRS  |  Email |Print

Currency-market volatility has been around for decades, if not centuries. Wide gyrations in exchange rates became a staple of international financial markets after the Bretton Woods system broke down in the early 1970s, and mega-depreciations were commonplace later in the decade and through much of the 1980s, when inflation raged across much of the world.
Even through much of the 1990s and early 2000s, 10-20% of countries worldwide experienced a large currency depreciation or crash in any given year. And then, suddenly, calm prevailed. Excluding the mayhem associated with the global financial crisis of late 2008 and early 2009, currency crashes were few and far between from 2004 to 2014……………………………………….Full Article: Source

Here’s one argument why China will lose its currency war

Posted on 29 January 2016 by VRS  |  Email |Print

A currency war is not all it’s cracked up to be. That is the verdict from Citi’s currency expert Steven Englander, who argues that efforts by central banks to devalue their currencies to maintain an edge over competing economies are not as effective as many are led to believe.
“Policy makers and investors talk about currency depreciation as if it is the ultimate weapon of economic policy, but that overstates its importance in driving activity,” said Englander in a report. “The economic bang for the depreciating buck, or yen or euro is relatively small.”……………………………………….Full Article: Source

Currency War in Asia

Posted on 28 January 2016 by VRS  |  Email |Print

Billionaire investor George Soros will not win the ‘war’ he is waging against the Chinese currency, according to the People’s Daily, Beijing’s state-run newspaper. George Soros declared a war on the Chinese currency at the World Economic Forum at Davos, and his influence has already affected fluctuations at global financial markets and subjected the Asian currencies to even greater speculative pressure.
However, the challenge Soros has levied against the renminbi and Hong Kong dollar is “doomed to fail, without any doubt,” the newspaper has declared. In fact, Soros’ attacks against the Asian currencies may in fact help China deepen fiscal and financial cooperation with other countries in the region………………………………………..Full Article: Source

Commodity-Exporter Currencies Hold Gains With Crude Oil’s Bounce

Posted on 27 January 2016 by VRS  |  Email |Print

The currencies of commodity-exporting nations held gains after raw-material prices rebounded, providing a respite from this month’s selloff. The Canadian dollar and South African rand rose about 1 percent on Tuesday as prices for crude oil, metals and agricultural commodities gained.
The currencies had advanced amid a broader climb for natural-resource exporters against the U.S. dollar in the previous five days. “The key driver for commodity currencies today is that oil is up 3 to 4 percent,” Ian Gordon, a foreign-exchange strategist at Bank of America Corp. in New York, said ……………………………………….Full Article: Source

China warns Soros against ‘declaring war’ on its currency

Posted on 27 January 2016 by VRS  |  Email |Print

Not long after billionaire George Soros forecast a so-called hard landing for the Chinese economy, Beijing fired back by calling out the high-profile investor, warning him of betting against its currency, according to media reports Tuesday.
“Soros’ challenge against the renminbi and Hong Kong dollar is unlikely to succeed, there is no doubt about that,” said a government official in an opinion piece widely cited by several media outlets………………………………………..Full Article: Source

Commodity Exporters’ Currencies Weaken Against Dollar on Oil Glut Worries

Posted on 26 January 2016 by VRS  |  Email |Print

The currencies of commodity-exporting countries resumed their slide against the dollar Monday as oil prices halted a recent sharp rally and plunged again on renewed concerns about oversupply.
Currencies including the Colombian peso, the Russian ruble and the Canadian dollar all depreciated against the dollar after China reported on Monday that its diesel usage in 2015 fell from the prior year. On the same day, the chairman of the Saudi Arabian Oil Co. said that the state-run oil company can withstand low oil prices for “a long, long time,” reiterating the kingdom’s commitment to oil production………………………………………..Full Article: Source

Aussie to Kiwi in Commodity Comeback Upend Year’s Favored Trades

Posted on 26 January 2016 by VRS  |  Email |Print

Commodity currencies are making a comeback as increasing speculation central banks will step up stimulus revived demand for risk, upending this year’s favorite trades. The dollars of Australia and New Zealand climbed Monday, adding to gains from last week when they rose along with the currencies of Canada and Norway in anticipation of further stimulus from the European Central Bank.
Hedge funds added to bearish bets on commodity currencies in the week through Jan. 19, while building the most bullish yen position in almost four years. ECB President Mario Draghi is scheduled to speak Monday in a week when the Federal Reserve and Bank of Japan meet, with markets also speculating on monetary easing in China………………………………………..Full Article: Source

Nigeria’s currency in free fall due to oil slump

Posted on 26 January 2016 by VRS  |  Email |Print

Food wholesaler Chioma Oluwaseun was sorting through the inventory in her warehouse to hike prices for imports, in line with a Nigerian currency that has lost a third of its value on unofficial “parallel markets” since last month.
Even though the naira is plunging on the street, a result of the collapse of global prices for oil exports, which Nigeria depends on for state revenue, the official exchange rate has yet to budge. But few think that situation can last much longer………………………………………..Full Article: Source

IMF’s Lagarde says markets need clarity on China currency

Posted on 25 January 2016 by VRS  |  Email |Print

Financial markets need more clarity on how Chinese authorities are managing their currency, particularly the relationship of the yuan to the U.S. dollar, IMF Managing Director Christine Lagarde said on Saturday.
Sharp swings in the yuan have contributed, along with a dramatic fall in the price of oil, to global market volatility since the beginning of 2016. Bank of Japan Governor Haruhiko Kuroda, speaking on the same panel at the World Economic Forum in Davos, said he believed China should use capital controls to stabilize its currency while keeping domestic monetary policy loose………………………………………..Full Article: Source

China to set up its own virtual currency

Posted on 25 January 2016 by VRS  |  Email |Print

The People’s Bank of China (PBOC), China’s central bank, hopes to launch its own virtual currency to cut the cost of handling paper money and to give the government more control of the country’s money supply.
A research team has been looking into digital currencies since 2014 and has achieved some encouraging initial results. This team should now “set up clearer strategic objectives for launching digital currencies, overcome the technological barriers … and aim for an launch of the central bank’s digital currencies,” the PBOC said………………………………………..Full Article: Source

Chinese currency chaos

Posted on 22 January 2016 by VRS  |  Email |Print

A sharp drop in the value of the yuan appears imminent, even though its international prestige has been heightened with a decision by the International Monetary Fund to include the Chinese currency in the basket of currencies constituting the special drawing rights.
A dreadful slump affecting China’s export-oriented industries has accelerated selling of the yuan on the exchange market while doubts have been cast on Beijing’s ability to shore up the currency. A rapid fall in the yuan’s value could further exacerbate the Chinese people’s purchasing power and deal a serious blow to a global economy already being shaken by slowdowns in many emerging economies………………………………………..Full Article: Source

Rouble hits new low, Kremlin denies currency collapse

Posted on 22 January 2016 by VRS  |  Email |Print

The rouble maintained its slide through record lows on Thursday, threatening more hardship for ordinary Russians and prompting some to stock up on dollars as the Kremlin denied the currency was collapsing.
Central bank governor Elvira Nabiullina cancelled a visit to the World Economic Forum meeting in the Swiss resort of Davos as the currency, squeezed by Western sanctions and the collapse in the value of Russia’s oil exports, chalked up one of its biggest intraday drops in around a year. At one point the rouble smashed through 83 per dollar for the first time and weakened as far as 86, though it later recovered some ground………………………………………..Full Article: Source

Russian Currency Slumps To Record Low

Posted on 21 January 2016 by VRS  |  Email |Print

Russia’s currency has slumped to a record low, trading at 82 rubles per U.S. dollar and 89.55 per euro. The ruble’s previous all-time low was 80.10 per dollar in December 2014.
The declining value of the ruble comes as global oil prices continued to fall, trading on January 20 at around some $27.45 per barrel and even briefly going under $27 per barrel. The ruble also is under pressure from economic sanctions that the West has imposed against Russia in response to its support for pro-Russian separatists in eastern Ukraine………………………………………..Full Article: Source

Saudi Arabia moves to protect currency peg

Posted on 21 January 2016 by VRS  |  Email |Print

Saudi Arabia is trying to stop speculators from betting against its currency. Authorities this week ordered banks to limit traders’ ability to bet against the riyal in the futures market in an effort to protect its nearly 30-year old peg to the dollar, according to Bloomberg News.
The peg has come under pressure lately as speculators have been piling into bets against the currency as falling oil prices have helped deplete the desert kingdom’s foreign currency reserves………………………………………..Full Article: Source

Bitcoin: Is the crypto-currency doomed?

Posted on 19 January 2016 by VRS  |  Email |Print

A high-profile Bitcoin developer has said the crypto-currency has failed and he will no longer take part in its development. Mike Hearn, a Zurich-based developer and long-time proponent of Bitcoin, surprised many this weekend when he published a blog calling Bitcoin a “failed” project.
Mr Hearn, who had until recently been working on new software for the currency, says he has now sold all of his own bitcoins and will no longer take part in the crypto-currency’s development. So, is Bitcoin doomed?……………………………………….Full Article: Source

Azerbaijan considers tighter currency controls to staunch losses

Posted on 19 January 2016 by VRS  |  Email |Print

Azerbaijan’s President Ilham Aliyev has ordered measures to support the economy and ailing manat currency, including a possible tightening of currency controls, help for banks, and a sell-off of state assets, state television reported on Monday.
The manat has lost 33 percent of its value against the dollar in the past month and the country has burned through more than half its foreign currency reserves trying to defend it against the effect of falling oil prices………………………………………..Full Article: Source

Expect boost for global currency war, resurgent yen and euro may force policy makers to step in

Posted on 18 January 2016 by VRS  |  Email |Print

A flare-up in the global currency war is looming, as a resurgent yen and euro threaten to give policy makers in Japan and Europe an incentive to add monetary stimulus. Japan’s currency advanced versus the dollar for the third time in four weeks, while the euro climbed versus most of its peers.
Hedge funds lifted bets on yen strength to the highest in more than three years, and pared wagers against the European common currency. The greenback suffered as sentiment cooled for further currency-supportive interest-rate increases in the US amid sustained market volatility and weakerthan-forecast domestic economic data………………………………………..Full Article: Source

Currency Dictatorship. The Struggle to End US Dollar Hegemony

Posted on 18 January 2016 by VRS  |  Email |Print

India and the BRICS are giving the US dollar the boot? Is it really so? The last time a country decided to dump the dollar in the oil business, the US destroyed it. Now India, the world’s third largest economy, and Iran have agreed to settle their outstanding oil dues in rupees. What’s more, the two countries may conduct all future trade in their national currencies.
This follows an agreement between Iran and India in mid-2011 in which both sides decided to settle 45 per cent of India’s oil import bill in rupees and the remaining 55 per cent in euros. In March 2012 the two countries inked the Rupee Payment Mechanism that allowed India to buy crude oil in its national currency. Iran then used the funds to buy products from Indian manufacturers………………………………………..Full Article: Source

Is China a Currency Manipulator?

Posted on 15 January 2016 by VRS  |  Email |Print

We are well into a political season as the U.S. presidential campaign heats up. We are also in the midst of deflationary pressures evident in the unprecedentedly low cost of oil and other commodities, and the falling dollar value of the yuan.
Many Republican candidates, led by Donald Trump, are keen to blame America’s economic troubles on President Obama and, of course, on the Chinese. “Currency manipulator” is the typical charge against China. But what does it mean and why is being thrown around now?……………………………………….Full Article: Source

China Wants a Reserve Currency and Control, But Can’t Have Both

Posted on 15 January 2016 by VRS  |  Email |Print

This week’s unprecedented surge in the cost of borrowing yuan in Hong Kong is putting a spotlight on one of China’s biggest policy dilemmas: whether to create a real international reserve currency, or to keep control of its value.
The cost of maintaining control came to the fore on Tuesday as interbank lending rates in the city jumped five-fold to a record 66.82 percent, a side effect of central bank intervention to combat the yuan’s slump to a five-year low. Such efforts to influence market pricing are untenable if China wants to develop active offshore markets for financing and trade in the currency, according to Rabobank Group and Royal Bank of Canada………………………………………..Full Article: Source

The perils of China’s currency devaluation

Posted on 14 January 2016 by VRS  |  Email |Print

The recent decline in China’s currency, the renminbi, which has fuelled turmoil in Chinese stock markets and drove the government to suspend trading twice last week, highlights a major challenge facing the country: how to balance its domestic and international economic obligations. The approach the authorities take will have a major impact on the wellbeing of the global economy.
The 2008 global financial crisis, coupled with the disappointing recovery in the advanced economies that followed, injected a new urgency into China’s efforts to shift its growth model from one based on investment and external demand to one underpinned by domestic consumption………………………………………..Full Article: Source

Brazil’s Real Rises as Commodities Climb on Chinese Export Data

Posted on 14 January 2016 by VRS  |  Email |Print

Brazil’s real rose for a second day after retail sales unexpectedly rose and emerging-market currencies gained on a report showing Chinese exports increased. The real advanced 0.3 percent to 4.0167 per dollar Wednesday in Sao Paulo. The Bloomberg Commodity Index, which touched a record low on Tuesday, rose after China’s trade surplus widened and exports recovered. Commodities account for about half of Brazil’s exports.
China, Brazil’s top trading partner, imported a record amount of crude last year as oil’s lowest annual average price in more than a decade spurred stockpiling and boosted demand from independent refiners………………………………………..Full Article: Source

How ‘In God We Trust’ Got on the Currency in the First Place

Posted on 14 January 2016 by VRS  |  Email |Print

A lawyer filed suit in Ohio this week seeking to remove the phrase “In God We Trust” from U.S. currency. It’s far from a new fight, and as with many interactions between religion and the American state (like the “under God” part of the Pledge of Allegiance), the invocation of the almighty is newer than you might think.
“In God We Trust” was first added to U.S. coins during the beginning of the Civil War, when religious sentiment was on an upswing and concerned Americans wanted the world to know what their country stood for………………………………………..Full Article: Source

Latest oil slide triggers more bets against commodity currencies

Posted on 13 January 2016 by VRS  |  Email |Print

Bets against commodity-linked emerging currencies are on the rise again as crude prices fall to around $30 a barrel, but volatility remains well below the peaks of last year. Brent crude’s renewed tumble this year has put commodity exporters’ currencies on course to extend last year’s losses and some, such as the South African rand and the Mexican peso, have hit record lows.
The Russian rouble is inching lower too, 4 percent off record lows struck toward the end of 2014, and these spot market losses are filtering into options markets where investors can try to hedge against further weakness………………………………………..Full Article: Source

‘Murderous’ Yuan Rate Jolts Hong Kong as Top Currency Hub

Posted on 13 January 2016 by VRS  |  Email |Print

An unprecedented surge in the cost of borrowing in yuan in Hong Kong adds to questions about the outlook for the city’s role as the biggest offshore hub for the Chinese currency. The overnight yuan Hong Kong Interbank Offered Rate climbed 53 percentage points to 66.82 percent on Tuesday — a side-effect of a campaign by the People’s Bank of China to curb arbitrage between the offshore and onshore rates for the currency.
“A 66 percent rate is murderous for others being swept up in this who are not speculating,”said Michael Every, head of financial markets research at Rabobank Group. Central banks “usually win a round like this, but lose in the end,” he added………………………………………..Full Article: Source

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