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Global currency markets are now dancing to China’s tune

Posted on 12 January 2016 by VRS  |  Email |Print

It has been a brutal start to the year for markets around the world - for several the worst start in their history. Stocks, currencies and commodities have taken a hammering. The Shanghai, Eurostoxx and Nikkei indexes were all down between 6% and 10% through the first week of the year, with palladium, oil and lead down in the same range.
Multiple currencies, including the South Korean won, Mexican peso, New Zealand dollar and South African rand, were down 2% to 4%. A key driver has been the devaluation of the Chinese yuan. Now, you might be wondering why a currency move in China is setting fire to markets across the globe………………………………………..Full Article: Source

China’s currency conundrum: Cause for alarm?

Posted on 12 January 2016 by VRS  |  Email |Print

Markets started 2016 in chaos: It was the worst start for the S&P 500 and the Dow Jones industrial average ever. Global stocks had their worst drop in more than four years, down more than 6 percent for the week.
A lot of it comes back to red alerts about China’s currency and what policymakers are trying to do. But is it justified? A growing chorus of economists and currency strategists suggests the weakness in the yuan may not be as scary as some believe………………………………………..Full Article: Source

Yen Weakens From 7-Month High as Currency Havens Lose Attraction

Posted on 12 January 2016 by VRS  |  Email |Print

The yen fell from its strongest level since August as China’s central bank kept the yuan’s daily fixing stable, damping demand for safer assets that built up in the new year during the Asian country’s market turmoil.
Japan’s currency declined against most of the major peers, while higher-yielding commodity currencies such as Australia’s dollar and Mexico’s peso rebounded. The yen rallied every day last week as turbulence in China’s financial markets rippled across stocks and commodities around the world, and stoked currency volatility to a three-month high………………………………………..Full Article: Source

The Myths of China’s Currency ‘Manipulation’

Posted on 11 January 2016 by VRS  |  Email |Print

Global equity markets have experienced steep declines since the new year, and many assert the devaluation of the yuan by the People’s Bank of China is a major cause of this week’s turmoil.
These devaluations have fueled long-standing outcries that China is playing dirty. Presidential hopeful Donald Trump, for example, recently claimed on these pages that “the wanton manipulation of China’s currency” is “robbing Americans of billions of dollars of capital and millions of jobs.”……………………………………….Full Article: Source

China-driven currency war would hurt Asia

Posted on 11 January 2016 by VRS  |  Email |Print

China’s decision to push the value of its currency lower has opened a new front of worry for global investors and consumers alike, namely a potential wave of currency devaluations among the so-called Asian tigers — South Korea, Singapore and Taiwan, sparking an Asian-wide currency war.
Such an outcome, foreign exchange specialists say, would further curb global growth expectations, which already are being revised downward as China’s once booming economy retrenches. The US dollar’s strong run recently — together with the plunge in the price of oil and other commodities — has damaged fragile emerging market economies such as Brazil, Turkey and South Africa………………………………………….Full Article: Source

Saudis told to prop up currency amid global devaluation war fears

Posted on 11 January 2016 by VRS  |  Email |Print

Investors are betting the kingdom’s dollar peg will soon collapse, but oil giant should deploy the full force of firepower to protect riyal, say World Bank. Saudi Arabia should use its massive foreign exchange reserves to defend the riyal, amid fears the world is descending into a new phase of global currency wars, the World Bank has said.
The kingdom’s shaky currency peg with the dollar has come under record pressure this week as the price of oil has plummeted to near 12-year lows at $32-a-barrel………………………………………..Full Article: Source

Is China really devaluing its currency?

Posted on 08 January 2016 by VRS  |  Email |Print

Markets have taken fright at the prospect a new round of currency wars. But the Chinese say they want a “stable” exchange rate. So what’s really going on? Since the summer, investors have been keeping an uneasy eye on the value of the Chinese currency.
In August, Beijing decided to tweak its exchange rate peg with the dollar, making the renminbi float in a wider band against the greenback. This sparked immediate market panic that China was entering into the world’s currency wars. But the devaluation in itself was small. Allaying fears further, the Chinese began to immediately intervene to prop up the RMB to stop it falling too fast by drawing down their reserves………………………………………..Full Article: Source

China’s currency devaluation and the global economy

Posted on 08 January 2016 by VRS  |  Email |Print

China devalued its currency to a five-year low against the US dollar on Wednesday, sending global stock markets tumbling. The devaluation so far has been minor, from an exchange rate of 6.2 to the dollar last summer to 6.55 now. So, why are markets so jittery?
First, look at what China says it is trying to do. Last month, China’s central bank started publicising a trade-weighted index of its exchange rate to highlight the fact that the currency has appreciated a lot. Ten years ago, there was broad agreement that China’s currency was seriously undervalued. ……………………………………….Full Article: Source

Mexico fears currency war after China’s yuan move

Posted on 08 January 2016 by VRS  |  Email |Print

Mexico warned on Thursday that China’s weakening of the yuan could trigger a global currency war, as the peso hit new lows against the dollar. The remarks by Finance Minister Luis Videgaray came after the People’s Bank of China weakened the yuan currency to the lowest level since March 2011.
“As the yuan moves, worries begin around the world that we could be entering a cycle of competitive devaluations, which is frankly a perverse phenomenon because if all countries end up devaluating, nobody will makes itself more competitive,” Mr Videgaray said………………………………………..Full Article: Source

$A plunges on China, commodities, US rate outlook

Posted on 07 January 2016 by VRS  |  Email |Print

The Australian dollar has plunged overnight in New York amid renewed concerns about China’s economic outlook, falling commodity prices and the US central bank’s determination to lift interest rates.
The currency’s tumble came hours after China lowered the yuan, stoking investor concern that weakness in the world’s second-largest economy will drag down global growth. The Aussie was 1.5 per cent lower at US70.52¢ in mid-afternoon trade in New York, after earlier falling as low as US70.49¢, compared with Wednesday’s local close of US71.20¢………………………………………..Full Article: Source

China sets yuan currency level near five-year low

Posted on 07 January 2016 by VRS  |  Email |Print

China’s central bank on Wednesday set the value of the yuan currency against the US dollar at its lowest since April 2011, according to the national foreign exchange market, raising worries over the health of the world’s second-largest economy.
The People’s Bank of China (PBoC) set the daily reference rate at 6.5314 to $1.0 on Wednesday, down by 0.22 per cent from the previous day, according to the China Foreign Exchange Trade System. It was its weakest for nearly five years. The move marked the seventh session the PBoC has weakened the yuan, reviving concerns over a shock devaluation of the currency in August, when it guided the unit down nearly five per cent in a week………………………………………..Full Article: Source

Are we in a phase where currency wars are normal?

Posted on 06 January 2016 by VRS  |  Email |Print

In calendar year 2015, the Indian rupee depreciated 4.90% against the US dollar from 63.03 to 66.15. It was the fifth straight year of rupee depreciation. Rupee typically depreciates 5.5% to 6% YoY and the trend has been visible since the last 5-7 years. The rupee was one of the best performers amongst its Asian and emerging market peers.
The rupee performed well even in comparison to the dollar index which gained 9% during the year and other G7 currencies which are running a divergent monetary policy vis-a-vis US dollar………………………………………..Full Article: Source

What did you do in the currency war, Daddy?

Posted on 06 January 2016 by VRS  |  Email |Print

The financial crisis and its immediate aftermath saw close cooperation among the world’s policymakers, especially central bankers. For example, in October 2008, the Federal Reserve coordinated simultaneous interest-rate cuts with five other major central banks. It also established currency swap arrangements—in which the Fed provided dollars in exchange for foreign currencies—with fourteen foreign central banks, including four from emerging markets.
However, once the crisis had passed and recovery begun, national economic interests began to diverge. In particular, some foreign policymakers argued that the Fed’s aggressive monetary policies, undertaken to support the U.S. economic recovery, were damaging their own economies………………………………………..Full Article: Source

In Currency Rout, Emerging Nations Save $2.8 Trillion War Chest

Posted on 05 January 2016 by VRS  |  Email |Print

Developing nations are embracing the greater competitiveness that comes with the beating their currencies have taken, leaving their rainy day funds untouched.
Foreign reserves in the 12 biggest emerging markets, excluding China and countries with pegged currencies, fell about 2 percent to $2.8 trillion in 2015, according to data compiled by Bloomberg. The actual decline may be smaller because the strengthening dollar reduced the value of other reserve currencies such as the euro………………………………………..Full Article: Source

New yuan trading hours: What you need to know

Posted on 05 January 2016 by VRS  |  Email |Print

China’s currency, the yuan or renminbi as it’s known, will see extended trading hours starting Monday in Beijing’s latest effort to promote its currency on the international stage.
Instead of ending at 4.30pm local time, trading will now continue until 11.30pm while opening hours remain unchanged at 9.30am. So, what does this all mean for the currency’s outlook? Here are the facts explained. The new hours will now overlap with Europe’s trading day as the mainland seeks to make the yuan more widely used globally………………………………………..Full Article: Source

Nairobi Residents Turn to Community Currency

Posted on 04 January 2016 by VRS  |  Email |Print

At the Sifa Primary School outside Nairobi, Kenya, students pay their tuition with a new, local currency called the pesa. The school is one of several institutions that accepts the community currency.
Teacher Josephine Ouma says the currency has made life easier. The currency is widely used by people in the Gatina Village where she lives. The pesas are equal in value to the Kenyan shilling and can be spent in the community just like cash………………………………………..Full Article: Source

China’s Currency Facing A New Set Of Challenges in 2016 After A Rocky Year

Posted on 04 January 2016 by VRS  |  Email |Print

China’s biggest challenge for 2016 may turn out to be one of the tools that helped enable its rapid rise as an export powerhouse: its currency. This year, Beijing scored a diplomatic coup when the International Monetary Fund integrated the renminbi, or yuan, into the basket of elite global currencies that it uses to track its members’ reserves.
Now, Chinese officials will have to manage the mix of financial, economic and diplomatic tensions arising from their ambitions to see the renminbi in wide use — at precisely the moment when those tensions are higher than ever — and prove themselves worthy of the honor………………………………………..Full Article: Source

The Renminbi Has No Chance to Become a Reserve Currency Until 2036

Posted on 30 December 2015 by VRS  |  Email |Print

The Chinese renminbi has been recently included in the IMF’s reserve currency basket, which previously consisted of the US dollar, the euro, the British pound, and the Japanese yen. These currencies represent the developed world’s most stable economies, so having the renminbi among them is a nice compliment to Beijing. It is not, however, an earth-shattering move in other respects.
Many people started asking me whether the Chinese currency will ultimately become the world’s reserve currency. In short, I don’t see the renminbi overthrowing the US dollar anytime in the next few decades. My crystal ball gets fuzzy after 2036, but for right now, it comes nowhere close to meeting the basic conditions for becoming the major reserve currency………………………………………..Full Article: Source

Russia’s stricken currency drops to 2015 low amid oil price slump

Posted on 30 December 2015 by VRS  |  Email |Print

Russia’s battered ruble on Tuesday continued its slide on the back of low oil prices, reaching a new 2015 low against the dollar and dropping to below 80 against the euro. The Russian currency stood on Tuesday at 72.85 against the dollar, down from 72.46 on Monday.
The ruble meanwhile stood at 80.02 against the euro, dropping below 80 for the first time since late August. The slide in oil prices and Western sanctions over Moscow’s role in the Ukraine crisis have pummeled the oil-dependent Russian economy in recent months. At his annual press conference earlier this month President Vladimir Putin assured the country could weather the headwinds, despite volatility in oil prices………………………………………..Full Article: Source

Pressure Grows on Saudi Arabia’s Currency

Posted on 30 December 2015 by VRS  |  Email |Print

Back in September I wrote an article here on Real Money talking about what could be shaping up as a currency crisis for Saudi Arabia. I explained that the Saudis were heavily short dollars, due to a surge in dollar-denominated loans. To make matters worse, of course, the continued crash in oil prices, largely of Saudi making, was only intensifying their dollar cash flow problem.
Recently, it was announced that the Kingdom was making huge cuts in subsidies to its citizens. Everything, from gasoline to power to water and monthly guaranteed income supports, will take a hit. The problems will continue to rise as long as oil prices stay down where they are………………………………………..Full Article: Source

The only global currency to crush dollar this year

Posted on 29 December 2015 by VRS  |  Email |Print

Bitcoin is up over 40 percent this year. The U.S. Dollar Index: a gain of 9 percent. The U.S. dollar has had a nice run. It’s been the talk of global currency trading all year long. And why not? After years of a weak greenback due to dovish Federal Reserve policy, the Dollar Index has extended big 2014 gains, up near-9 percent against a basket of major world currencies this year.
Some individual currency trades, like USD/Brazil Real, have netted currency investors huge returns. But to find what’s arguably been the best global currency in 2015, an investor might need to put quote marks around the term “global currency.”……………………………………….Full Article: Source

Zimbabwe Switches to Yuan as Reserve Currency

Posted on 29 December 2015 by VRS  |  Email |Print

Zimbabwe’s surprising recent announcement that it would shift to the Chinese yuan as its reserve currency is a sign of friendship with China, but probably not much more, say regional business people and economists.
The announcement last week raised eyebrows among economists outside the country. The nation’s finance minister touted the move as a huge advance in relations between the two nations, and noted that China would use the occasion to to cancel a bundle of debts, estimated at $40 million, that are due this year………………………………………..Full Article: Source

ETF Issuers with Currency-Hedged ETFs Ride High on Strong Dollar

Posted on 28 December 2015 by VRS  |  Email |Print

As the U.S. dollar strengthened throughout 2015, managers of currency-hedging exchange-traded funds had a banner year—they collected one of every four dollars invested in U.S. ETFs and rewarded their investors well.
Now, they are doubling down with plans for as many as 41 new currency-hedging funds on file with regulators. But many of those funds may come to market after the easy money in currency hedging has been made………………………………………..Full Article: Source

Forex Focus: commodity currencies had a bad year – and things may get worse

Posted on 28 December 2015 by VRS  |  Email |Print

The Canadian, Australian and New Zealand dollars and the South African rand have been among the worst performers in 2015. Sterling held up well in 2015 against most currencies apart from the US dollar. The first major change came with the General Election in May, when it was widely expected that there would be another coalition government of some sort. The outright Conservative win gave the pound a push higher even against the dollar.
The main reason for sterling’s strength was the hope that the Bank of England would raise interest rates this year. Debates about the timing of a rate hike both in the UK and US raged all year until the Federal Reserve Bank finally made the move at the last knockings of 2015 on December 16………………………………………..Full Article: Source

Pound is ‘most overvalued currency in the world’, analysts claim

Posted on 28 December 2015 by VRS  |  Email |Print

Analysts says sterling will remain vulnerable to further falls next year as government picks-up pace of spending cuts and Brexit vote looms. The pound is one of the most overvalued currencies in the world and will suffer next year as the Government ramps up spending cuts and uncertainty about Britain’s future in the EU weighs on growth.
Analysts at Deutsche Bank warned that the Bank of England may not be able to raise interest rates “at all” if Britain’s recovery slows. It believes the pound could fall as low as $1.27 next year and $1.15 in 2017 from about $1.485 today if the US Federal Reserve continues to tighten monetary policy and the Bank of England leaves interest rates on hold………………………………………..Full Article: Source

Rupiah Set to Reclaim Worst Asian Currency Mantle From Ringgit

Posted on 21 December 2015 by VRS  |  Email |Print

Indonesia’s rupiah is forecast to reclaim its position as Asia’s worst-performing currency on shrinking foreign-exchange reserves and the risk of capital outflows. After two years in which Malaysia’s ringgit weakened the most out of the region’s major currencies, the rupiah is seen dropping 6.2 percent against the dollar from Nov. 30 to the end of 2016, twice as much as the ringgit, according to a Bloomberg survey of strategists.
Indonesia’s currency declined the most among Asian emerging markets in 2012 and 2013, weakening 5.9 percent and 21 percent respectively, as commodity prices fell and tighter U.S. monetary policy triggered a flight from developing nations………………………………………..Full Article: Source

China to devalue its currency further

Posted on 21 December 2015 by VRS  |  Email |Print

In the last twelve months, most emerging markets’ currencies depreciated against the US dollar, helping improve their competitiveness. However, economies with a US dollar peg appreciated against other currencies. These include the export-intensive GCC countries, Hong Kong and China, which may face additional appreciation pressure after the Federal Reserve raised interest rates.
China has already acted to reverse the appreciation trend, according to a report prepared by Camille Accad, economist at Asiya Investments Company. In August, the central bank devalued the yuan following a change in the way it determines the country’s foreign exchange rate, which includes taking into consideration other major currency movements rather than just the US dollar………………………………………..Full Article: Source

Argentina’s currency is crashing by 30%

Posted on 18 December 2015 by VRS  |  Email |Print

Argentina’s currency just plunged by 30%. But don’t panic. It’s all part of new President Mauricio Macri’s larger plan to revive the country’s troubled economy and encourage international trade. Argentina’s newly installed government announced Wednesday that it was removing strict currency controls that had been in place for the past four years under former president Cristina Fernandez de Kirchner.
That means the currency will no longer be pegged to a level around 9.8 pesos per U.S. dollar. It was trading around 14 pesos per dollar early Thursday, a level previously seen only in the black market………………………………………..Full Article: Source

Currency trading algorithms

Posted on 18 December 2015 by VRS  |  Email |Print

Algorithm has been a dirty word this year. In September, Volkswagen admitted to installing a “sophisticated software algorithm” on certain vehicles to cheat emissions tests, and in November Barclays was fined $150m for alleged misuse of its foreign exchange algorithm. New regulation will soon be in place to manage the potential for “market distortion” as a result of the increased use of algorithms in financial markets.
But algorithms in themselves are not malicious, and their use is widespread and multi-faceted in trading across asset classes. At its core, an algorithm is simply a set of instructions given to a computer to carry out a specific task: “buy when the price drops below x”, “offer price y if the market moves in our favour”……………………………………….Full Article: Source

Argentina Announces Lifting of Currency Controls

Posted on 17 December 2015 by VRS  |  Email |Print

Argentina’s new government on Wednesday lifted currency controls, allowing its citizens to buy dollars freely for the first time in four years and setting the stage for a sharp depreciation of the peso.
The move, which officials hope will kick-start the faltering economy, is the strongest President Mauricio Macri has yet made in his bid to roll back the government interference that marked the country’s economy under the previous presidencies of Néstor and Cristina Kirchner………………………………………..Full Article: Source

Currency Collapse

Posted on 17 December 2015 by VRS  |  Email |Print

Cash is a scarce commodity in Greece. In June, Greek banks declared a surprise limitation on how much could be withdrawn from an account. At present, the government still limits the cash withdrawals of its citizens.
Of course, this is just the most recent development in a series of events that make up the cash squeeze. In response, Greeks have done what all people do when they cannot get enough currency – improvise. Since 2010, several alternative systems of payment for goods and services have cropped up in Greece. One is TEM, which allows people to accrue monetary credit online and then use that credit to pay others………………………………………..Full Article: Source

South Sudan Devalues Currency by 84% as Dollar Peg Abandoned

Posted on 16 December 2015 by VRS  |  Email |Print

South Sudan devalued its currency by 84 percent as the government allowed the pound to trade freely, surrendering to prices charged in the black market. The central bank adopted the parallel market rate of 18.5 per dollar on Tuesday from a previous fixed rate of 2.96, Governor Kornelio Koriom Mayik told reporters in Juba, the capital. The regulator will supply the market with occasional dollar sales, he said.
Oil output in the world’s newest nation has been curbed by a civil war that erupted two years ago, reducing production by about a third in a country that has sub-Saharan Africa’s third-biggest reserves………………………………………..Full Article: Source

How China Can Prevent a Currency War

Posted on 15 December 2015 by VRS  |  Email |Print

The Chinese yuan hit a four-year low last week against the U.S. dollar, stoking concerns that a devaluation could add to global deflationary pressures. With emerging-market growth rates and commodity price levels falling precipitously, China’s exchange-rate plans are quickly becoming a main source of uncertainty.
Since the People’s Bank of China on Aug. 11 adjusted the mechanism for setting the daily fixing rate and the value of the yuan fell by 1.9% against the dollar, markets have anticipated additional depreciation. This expectation could easily become self-fulfilling, which has forced China’s central bank to aggressively sell foreign reserves in order to prevent such an outcome………………………………………..Full Article: Source

Five currency trades to make in 2016, including USD-AUD

Posted on 15 December 2015 by VRS  |  Email |Print

Buy the US dollar. Again. That’s the message for next year from the biggest banks trading in the $US5.3- trillion-a-day currency market. Deutsche Bank, the world’s second-largest currency trader in Euromoney rankings, says the dollar’s rally has plenty of room to run - another two years, and about 10 per cent on a trade-weighted basis.
JPMorgan Chase & Co says the dollar will strengthen versus the currencies of New Zealand and Singapore, peaking in the second half of 2016. Goldman Sachs Group, Barclays and Credit Suisse Group are also bullish as the Federal Reserve moves toward raising interest rates for the first time in almost a decade………………………………………..Full Article: Source

China to link yuan to a basket of currencies

Posted on 14 December 2015 by VRS  |  Email |Print

China’s central bank has signalled its intention to change the way it manages the yuan’s value by potentially easing its loose peg to the US dollar and instead letting it track the currencies of its broader trading partners.
In an editorial posted on its website, the People’s Bank of China said the yuan’s exchange rate would be better measured against a basket of currencies rather than the US dollar alone. The foreign-exchange trading system run by the central bank for the first time published the composition of the currency basket, which comprises the US dollar, euro, yen and 10 other currencies………………………………………..Full Article: Source

Investors unsettled by prospect of global currency war

Posted on 14 December 2015 by VRS  |  Email |Print

Is 2016 set to be the year when the world’s top central bankers take off their gloves in preparation for a full-scale currency war? The prospect both excites and dismays investors as they contemplate the outlook for global markets in the coming year.
On the one hand, the prospect of further monetary stimulus from the world’s major central banks – including boosting their huge bond-buying programs even further – means that there’ll be even more liquidity washing through global markets, which should help propel global equity markets even higher. But markets can also be roiled by aggressive devaluations, particularly if investors worry that other central banks are likely to retaliate and set off a “race to the bottom”………………………………………..Full Article: Source

Currency war risks revived as yuan slides

Posted on 11 December 2015 by VRS  |  Email |Print

Five months after China shocked the world by devaluing the yuan, sparking widespread fears of a currency war with its Asian neighbors, investors are finding themselves with a case of deja vu. As the yuan, also called renminbi, trades at four-month low this week, expectations for further deprecation have been resurrected.
The currency weakened for two consecutive sessions amid lower fixings from the central bank. On Thursday, the People’s Bank of China (PBoC) set the official midpoint rate at 6.4236 per dollar, 0.15 percent weaker than the previous fix, prompting the currency to open at its lowest level since August’s 2 percent devaluation…………………………………………Full Article: Source

Nairobi Residents Turn to Community Currency

Posted on 11 December 2015 by VRS  |  Email |Print

Several low-income settlements outside Nairobi are using a new community-based currency called “pesas,” which are equal in value to the Kenyan shilling and can be spent in the community just like cash.
In Kawangware, an informal settlement on the outskirts of Kenya’s capital, students make their way to Sifa Primary School and pay their tuition with Gatina pesas. The school is one of several institutions that accepts the community currency. Teacher Josephine Ouma said the currency has made life easier………………………………………..Full Article: Source

Commodity currencies pause from sell-off

Posted on 10 December 2015 by VRS  |  Email |Print

Investors pushed back hard against the US dollar on Wednesday, providing relief for commodity currencies and enabling them to recover some of the ground lost in the wake of the dramatic fall in the price of oil this week. The greenback fell against most of its partners, including the yen, sterling and the euro, which was heading towards $1.10, as the volatility that afflicted commodity currencies in the first half of the week spread to other foreign-exchange pairs.
Steep selling in the currencies of commodity producers, a dominant FX theme this year, seemed to have eased, only to return with a vengeance as the oil price plunged to a seven-year low after a contentious Opec meeting last week………………………………………..Full Article: Source

South Africa’s currency just collapsed

Posted on 10 December 2015 by VRS  |  Email |Print

The South African rand fell to a record low Wednesday after the government removed Finance Minister Nhlanhla Nene, who was well-respected by the international financial community, from his position, market strategists said.
The rand -0.4235% traded as low as 15.40 to the dollar, a more than 4% drop from 14.60 a day earlier, according to FactSet data. The decline represents the rand’s largest one-day move since October 2008. The move was first reported by Bloomberg News. Government officials said Nene would be moved to another post, according to reports. It was unclear what that post would be………………………………………..Full Article: Source

China’s Yuan will be the Third Most Powerful Currency in the IMF Basket

Posted on 09 December 2015 by VRS  |  Email |Print

In spite of the fierce opposition of the US treasury Department, on November 30 the IMF finally approved the inclusion of the yuan in the Special Drawing Rights, the currency basket created in 1969 to complement the official reserves of the members of the multilateral organization.
With this the Chinese currency will become, next October 1 (2016), part of the integrating fifth of the IMF basket. The financial influence of China on a world scale will continue to grow at high velocity: the weight of the yuan in the Special Drawing Rights will be greater in comparison with the Japanese yen and the pound sterling………………………………………..Full Article: Source

Just too many reserve currencies

Posted on 09 December 2015 by VRS  |  Email |Print

With the Chinese yuan having joined the elite club, others could follow, complicating matters further for the IMF. On November 30, the International Monetary Fund announced its decision to include the RMB or the yuan as the fifth currency in the SDR basket that is currently composed of the following four currencies: the US dollar, the euro, the Japanese yen and the British pound.
Besides, the IMF has assigned a weight of 10.97 per cent for the Chinese currency above the Japanese yen and the pound sterling. This places the RMB in third position after the dollar and the euro, which have been assigned 41.73 per cent and 30.93 per cent weights respectively, while the Japanese yen and the pound sterling have been assigned a weight of 8.09 per cent each. The new weights will be effective October 1, 2016………………………………………..Full Article: Source

Why including yuan in IMF SDR basket may not be good for the world and Chinese economy

Posted on 08 December 2015 by VRS  |  Email |Print

The recent inclusion of the Yuan in IMF’s SDR basket may not be entirely good news for that country. Further, an imploding China will lead to more pain for emerging markets. To put it in perspective, Saugata Bhattacharya, Chief Economist, Axis Bank hits the nail on the head when he says: “While a significant step in internationalizing the Yuan, the implications on global foreign exchange rate and the Indian Rupee are likely to be limited in the near term. India should utilize the opportunity to diversify its currency holdings.”
Dong Bao of Credit Suisse says: “The IMF’s executive board announced it will include CNY (Chinese Yuan Remnibi) into its Special Drawing Rights (SDR) basket. After the inclusion of CNY, the SDR basket will include USD, EUR, CNY, GBP, JPY. CNY will be given 10.92% weights in the SDR basket.” ……………………………………….Full Article: Source

On China as a Currency Manipulator

Posted on 08 December 2015 by VRS  |  Email |Print

Accusing trading partners of currency manipulation has become fashionable among American politicians. Donald Trump has accused China of manipulating the Renminbi to the disadvantage of Americans. Hillary Clinton recently announced her opposition to the TransPacific Partnership trade agreement because it lacks sufficient protection against currency manipulation.
In this age of extreme political polarization, concern about currency manipulation has brought the two parties together. Democratic Senator Schumer and Republican Senator Lindsey Graham have demonstrated bipartisan opposition to China’s currency policies. They have proposed a specific tariff against Chinese goods unless China abandons its alleged currency manipulation………………………………………..Full Article: Source

New Argentina government aims to dismantle currency controls December 14

Posted on 07 December 2015 by VRS  |  Email |Print

The government of Argentina’s president-elect Mauricio Macri said Sunday that it will seek to dismantle a series of capital controls propping up the peso as soon as possible, aiming for December 14 if the central bank is under new management.
Macri has previously demured on giving details on his strategy to lift outgoing president Cristina Fernandez’ so-called “clamp-down” on dollar purchases that has created a multi-tiered exchange rate, saying he must first take a close look at the true state of national accounts………………………………………..Full Article: Source

China’s global currency upgrade

Posted on 07 December 2015 by VRS  |  Email |Print

The International Monetary Fund’s decision this week to add the yuan to the dollar, euro, yen and pound as a reserve currency was acknowledgment of China’s progress toward superpower status. At the same time the designation, effective next September, will impose limits on the Communist Chinese government’s economic and political maneuverability. For the world, the change should be seen as positive, although with costs and benefits.
The IMF is only being realistic in its designation, given China’s status already as an important world trader. By accepting its currency as “freely usable,” the IMF is catching up on an evolving reality. The designation means, for example, that the yuan can be used in the disbursement and repayment of international bailouts, such as the Greek rescue………………………………………..Full Article: Source

For China, the End of the Beginning on Road to a Global Currency

Posted on 04 December 2015 by VRS  |  Email |Print

After a struggle of more than half a decade, China this week overcame doubts and objections to qualify for official reserve status for its currency, the yuan. Now, the real battle begins.
Chinese officials who want a much bigger role for market forces — including central bank Governor Zhou Xiaochuan and his deputy Yi Gang — have used the goal as a lodestone for their ideas. In their campaign, the reformers won approval for gradually opening up the financial system to foreign participation and letting the private sector set interest rates………………………………………..Full Article: Source

China praises IMF currency inclusion

Posted on 04 December 2015 by VRS  |  Email |Print

China’s government praised this week’s decision by the International Monetary Fund to add the yuan to the world’s elite reserve currencies, saying it was a recognition of the government’s decades-long effort to reform its economy.
The government also vowed to use the IMF recognition of the yuan, also known as the renminbi, to press ahead with the changes. “This move will help gradually boost the internationalization of the renminbi and will enable China to be more engaged in global economic governance, ” China’s State Council said in a statement after its regular meeting Wednesday………………………………………..Full Article: Source

Currency swings cloud agriculture price drop

Posted on 03 December 2015 by VRS  |  Email |Print

“Way down among Brazilians, coffee beans grow by the billions . . . They’ve got an awful lot of coffee in Brazil,” sang Frank Sinatra in The Coffee Song . At first glance, this may seem to be the case for the South American country, with the arabica bean’s price plunging 30 per cent this year and its coffee exports at a record.
But this year’s coffee bear market has been heavily influenced by currency volatility rather than actual supply, say traders and analysts. “Foreign exchange has been a huge factor,” says Kona Haque, head of research at commodity traders ED&F Man………………………………………..Full Article: Source

Who loses when the renminbi joins the IMF basket?

Posted on 03 December 2015 by VRS  |  Email |Print

The International Monetary Fund’s decision to include the renminbi in its reserve currency basket is a major benchmark in China’s push to internationalize its currency, but it could also be a sign of decline for the currencies it is replacing.
Starting in late 2016, the renminbi will make up about 11 percent of the basket that defines the value of IMF special drawing rights — a type of reserve asset that makes up a small but symbolic portion of overall currency reserves………………………………………..Full Article: Source

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