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Commodities Briefing - Category | Currencies more

Greece could use ‘parallel currency’ as desperation grows

Posted on 08 May 2015 by VRS  |  Email |Print

European Central Bank board member floats the idea of an “IOU” system to pay civil servants if country runs out of euros. Greece could start using a “parallel currency” to pay its civil servants if it runs out of cash, one of the European Central Bank’s board members has suggested.
Highlighting the desperate situation faced by the country, Yves Merch, a member of the ECB’s executive board and governor of Luxembourg’s central bank, told Spanish newspaper La Vanguardia that Greece could resort to using “exceptional tools” to pay its obligations………………………………………..Full Article: Source

IMF calls on China to allow greater currency flexibility

Posted on 08 May 2015 by VRS  |  Email |Print

The International Monetary Fund (IMF) has said China should continue to provide “greater flexibility” in its exchange rate policy as the country continues to see slower growth. The IMF said the mainland should reduce foreign exchange intervention.
China’s currency is widely seen as undervalued and the country was accused for years of suppressing the yuan in order to boost exports. China says it is trying to manage the yuan’s value against other currencies. Analysts say that in reality it is still pegged to the dollar………………………………………..Full Article: Source

U.S. Currency Hawks: IMF’s Brighter Yuan Outlook Strengthens Case for Currency Sanctions in Trade Deal

Posted on 07 May 2015 by VRS  |  Email |Print

U.S. currency hawks, undismayed by the International Monetary Fund‘s brighter outlook on China’s exchange rate policy, say the fund’s new assessment on the yuan bolsters, not weakens, the case for currency sanctions in trade legislation. Federal lawmakers have long cited China as the chief target of legislation meant to punish trade partners seen to be using their exchange rates to gain a competitive advantage.
For more than a decade, the IMF’s assessment of the yuan as undervalued lent legitimacy to lawmakers and their constituents who complained that China’s currency policy came at the expense of American jobs, exports and growth………………………………………..Full Article: Source

Commodities, RBA, help prop up Australian dollar

Posted on 07 May 2015 by VRS  |  Email |Print

The Australian dollar is higher, helped by gains in commodity prices and expectations the Reserve Bank won’t be cutting the cash rate again. The dollar was worth US79.45 cents at noon (AEST), up from US78.69 cents yesterday.
The Aussie has pushed higher since the Reserve Bank yesterday cut the cash rate for the second time this year, but gave no indications it is looking to cut further. Data out today showed retail spending rose 0.3 per cent in March, slightly below expectations………………………………………..Full Article: Source

Fate of commodities is linked to dollar

Posted on 06 May 2015 by VRS  |  Email |Print

Amonth or so ago we highlighted a research note from Barclays that showed how investors were continuing to retreat from commodities. Long-term readers will not be surprised to learn that looks to have marked a turn of fortune for the sector. The Continuous Commodity Index is an equally weighted measure of 17 commodity futures, including energy, base metal and agricultural benchmarks, along with precious metals, too.
As such, it is a useful gauge of sentiment towards the broad asset class. The CCI hit a five-year low in March but has trundled higher of late, forming what chartists might consider a solid looking base………………………………………..Full Article: Source

A ‘Cash-Less Society’ = Bullion Confiscation

Posted on 06 May 2015 by VRS  |  Email |Print

As the corrupt regimes of the West move slowly but inexorably toward “banning cash”; it’s very important that bullion-holders understand the full implications of the latest, fascist moves by these regimes. Simply, “banning cash” = bullion confiscation.
If the Zombie-serfs of Western nations are no longer allowed to hold any of our debauched paper ‘money’, they certainly won’t be allowed to hold real money – i.e. gold or silver. However, even here there may be a means of escape, for those who plan for this (inevitable?) eventuality………………………………………..Full Article: Source

China knocks on door of reserve currency club

Posted on 06 May 2015 by VRS  |  Email |Print

The internationalisation of China’s renminbi faces its stiffest test yet as the International Monetary Fund debates whether to endorse the “redback” as a reserve currency alongside the dollar, euro, yen and sterling.
Becoming a constituent in the IMF’s Special Drawing Rights basket would be a big step forward for the currency, which remains tightly controlled by Beijing. Economist Louis Gave of GaveKal Dragonomics likens the move to Japan’s currency liberalisation in the 1980s and the subsequent run-up in yen assets………………………………………..Full Article: Source

Why IMF currency basket move would boost RMB

Posted on 06 May 2015 by VRS  |  Email |Print

This year the International Monetary Fund (IMF) will decide whether China’s renminbi (RMB) will join its Special Drawing Rights (SDR) basket of currencies. Asian market participants believe its inclusion is vital. The IMF determines the weightings of currencies in its SDR basket every five years. Later this year the IMF will consider adding the RMB to the basket, which includes four currencies: the euro, Japanese yen, pound sterling and US dollar.
While the SDR is rarely used in actual transactions - it makes up around only two percent of foreign exchange transactions – the move would be an automatic acknowledgement of reserve currency status. All central banks would hold RMB through their SDR assets………………………………………..Full Article: Source

‘World’s hardest-working currency’: Canadian dollar spikes again

Posted on 06 May 2015 by VRS  |  Email |Print

The Canadian dollar is bouncing higher again today, moving in a wide range to best the 83-cent mark. It’s largely because of a weaker U.S. currency, rather than anything to do with Canada, however.
The loonie touched a high of 83.31 cents U.S. today, and a low of 82.43 cents., hovering below the 83-cent mark by late afternoon. Greg Moore, senior currency strategist at RBC Dominion Securities, said the main driver of today’s bounce played the major role………………………………………..Full Article: Source

China’s currency is about to get a huge global endorsement

Posted on 05 May 2015 by VRS  |  Email |Print

Long pegged as a currency manipulator, China might be about to get a big stamp of foreign-exchange credibility. The International Monetary Fund is reportedly close to calling the Chinese yuan fairly valued. That’s something that hasn’t happened in more than a decade, and it would come despite opposition from the White House, according to the Wall Street Journal.
China’s foreign-exchange reserves are falling, a signal that it’s not intervening as much to keep its currency weak to bolster exports. Its holdings of US government debt are falling, too, which shows that whatever US dollar reserves it does have aren’t being parked in Treasury debt to the extent that they used to be. In fact, Japan recently has overtaken China as the leading foreign holder of US debt………………………………………..Full Article: Source

The dollar joins the currency wars

Posted on 05 May 2015 by VRS  |  Email |Print

In a world of weak domestic demand in many advanced economies and emerging markets, policy makers have been tempted to boost economic growth and employment by going for export-led growth. This requires a weak currency and conventional and unconventional monetary policies to bring about the required depreciation.
Since the beginning of the year, more than 20 central banks around the world have eased monetary policy, following the lead of the European Central Bank and the Bank of Japan. In the eurozone, countries on the periphery needed currency weakness reduce their external deficits and jump start growth………………………………………..Full Article: Source

IMF to Brighten View of China’s Yuan

Posted on 04 May 2015 by VRS  |  Email |Print

The International Monetary Fund is close to declaring China’s yuan fairly valued for the first time in more than a decade, a milestone in the country’s efforts to open its economy that would blunt U.S. criticism of Beijing’s currency policy.
The fund’s reassessment of the yuan—set to be made official in IMF reports on China’s economy due out in the coming months—follows years of IMF censure of Beijing’s management of the currency. The IMF’s latest view undermines the Obama administration’s pressure on China over its management of the currency and could undercut congressional efforts to inject yuan concerns into pending trade legislation………………………………………..Full Article: Source

IMF: South Sudan currency policy enables ‘hidden transfer of resources’

Posted on 04 May 2015 by VRS  |  Email |Print

The International Monetary Fund (IMF) says that the South Sudanese government has set an exchange rate between the dollar and the South Sudanese pound that is not “realistic,” alleging that the country’s currency policy results in a “hidden transfer of resources” to individuals with “privileged access.”
Last Friday the independent Indian Ocean Newsletter reported that an internal European Union memo had characterized South Sudan’s system of governance as ‘kleptocratic’ – a Greek term meaning “rule by theives.” The report added that the existing gap between the official exchange rate and the street rate “benefits a small number of privileged people close to the ruling circles.”……………………………………….Full Article: Source

Currency-Hedged ETFs Are 2015’s Hottest Trend

Posted on 30 April 2015 by VRS  |  Email |Print

Currency-hedged exchange-traded funds (ETFs) are perhaps the hottest trade in 2015. Since the beginning of the year, over $33 billion has flowed into these ETFs, which hold foreign equities but neutralize the foreign currency exposure.
The WisdomTree Europe Hedged Equity ETF (HEDJ), for instance, has experienced inflows of nearly $13 billion, the most of any ETF. And the Deutsche X-Trackers MSCI EAFE Hedged Equity ETF (DBEF) isn’t far behind with inflows of over $9 billion. Of course, the popularity of these funds has been driven by a strong U.S. dollar, which has gained over 20% in value against the euro over the past year………………………………………..Full Article: Source

Dollar Rally Is Over, Time To Rotate Into Multinationals, Commodities

Posted on 30 April 2015 by VRS  |  Email |Print

Goldman Sachs is wrong about the dollar, according to Cornerstone Macro in a report published on Monday. Cornerstone Macro is top ranked in macroeconomics research by Institutional Investors. The debate is always: What’s been driving the dollar? Goldman Sachs, for instance, believes foreign central banks’ monetary easing policies have been the catalysts that will push the U.S. dollar higher. See my April 23 blog “Goldman: The Dollar Rally Is Not Over“.
Cornerstone Macro’s Francois Trahan and team take a different view. “Our work suggests that the bulk of dollar strength [over the past several quarters] has been a function of a global growth slowdown,” wrote the analysts………………………………………..Full Article: Source

Yuan may get a second chance if it fails IMF currency basket review

Posted on 30 April 2015 by VRS  |  Email |Print

The International Monetary Fund (IMF) won’t rule out a possibility of holding a special review before 2020 to discuss the yuan’s eligibility to join its special drawing rights (SDR) basket if the currency fails to make it at a five-yearly review this year, an IMF official said.
The IMF’s 24-member executive board is due to meet informally next month before a formal review in autumn that will examine whether any currencies meet the criteria to be added to SDR, a type of monetary reserve currency created in 1969 which operates as a supplement to the existing reserves of a number of key economies around the world………………………………………..Full Article: Source

Hedge Funds Lead Shift In Dollar Sentiment

Posted on 29 April 2015 by VRS  |  Email |Print

Betting that the dollar will keep pushing higher against major currencies has lost its allure. Up until a few weeks ago positioning for a further climb of the dollar against the euro and the yen was the only game in town, but investors and traders’ are scaling back on the trade, according to the latest positioning data from the Commodities Futures Trading Commission, which measures a portion of the market that serves as a good proxy for the whole.
In fact, being long the dollar has been named as the most crowded trade for months in surveys of fund managers by Bank of America Merrill Lynch. But now the trade is losing steam………………………………………..Full Article: Source

How the Yuan Could Win Reserve Currency Status Even if the U.S. Objects

Posted on 29 April 2015 by VRS  |  Email |Print

Will the U.S. back China’s latest bid to make the yuan a global currency? It may not really matter. Washington’s veto-power at the International Monetary Fund may not apply when the executive board decides later this year whether to include the yuan in the elite basket of currencies that comprise the IMF’s emergency lending reserves.
China’s bid to get its currency included in the IMF’s Strategic Drawing Rights, or SDR, has recently gained support from key U.S. allies as Beijing increasingly flexes its muscle in the global economy………………………………………..Full Article: Source

History shows a currency breakup isn’t always a disaster

Posted on 29 April 2015 by VRS  |  Email |Print

Investors, economists and commentators have spent a lot of time agonizing over the prospect of a Greek exit from the euro, and not without justification. But the chart below from Adam Slater, lead economist at Oxford Economics, underscores the fact that currency breakups themselves are far from rare events and that, in most cases, the exit hasn’t been followed by a cataclysmic drop in output.
In fact, more than 70 countries and territories have exited currency unions since 1945, notes Slater. And he observes that when steep falls in output did occur, it was often the result of factors like civil war or a transition from a planned economy to a market economy………………………………………..Full Article: Source

Russian central bank opposes restrictions on using foreign currency

Posted on 28 April 2015 by VRS  |  Email |Print

Russia’s central bank said late on Monday that it opposed restrictions on using foreign currency in Russia. Russia’s Security Council earlier on Monday proposed measures aimed at reducing the use of foreign currency in Russia and boosting the use of the rouble in international settlements.
The Security Council gave few details about the measures it had proposed to limit the use of foreign currency in a brief statement on its website. The central bank responded by saying its position was that such restrictive measures were “inadvisable”………………………………………..Full Article: Source

China’s Currency Move Is Sign of Larger Struggle in Yuan

Posted on 28 April 2015 by VRS  |  Email |Print

Look no further than trading in the Chinese yuan if you want to see how challenging coming years are likely to be for China’s policy makers and the global economy. The yuan has risen against the dollar this year despite growing slack in the Chinese economy and the pain a strong currency inflicts on its export sector.
The gains reflect the scarce options facing Beijing as it shifts from an economic model centered on exports and subsidized investment to one where growth is fueled by consumer spending. Everyone—China, the U.S., the entire world—needs that transition to happen, but it won’t be easy………………………………………..Full Article: Source

How do you choose the right currency service?

Posted on 24 April 2015 by VRS  |  Email |Print

The bank is not the only way to move your money around the world - here are the strengths and weaknesses of three money exchange options. The currency exchange market has changed beyond recognition over the past decade. It has responded to the changes in the way we live today: business is transacted across borders, and currencies need to be exchanged 24 hours a day.
So you have more choice than ever before. There is the best-known route of the high street bank. More recent to the market are currency brokers and peer-to-peer exchange services. But how do you choose between them? Each has its strengths and weaknesses and will suit different situations and people. We’ve assessed all the types of service on offer and point out the pros and cons of each, particularly if you are moving large sums…………………………………..Full Article: Source

Swiss left helpless in currency wars as franc surges

Posted on 24 April 2015 by VRS  |  Email |Print

Switzerland is running out of ammunition to fight the global currency wars. In the three months since the Swiss National Bank scrapped the franc’s ceiling against the euro, it’s intervened in currency markets, cut interest rates and on Wednesday made more depositors subject to its negative rates. Yet the franc has still gained the most among its Group-of-10 peers this year, with traders positioned for further strength.
Ditching the cap has left the nation at the mercy of the European Central Bank’s unprecedented stimulus program, which is driving investment into franc assets. Those gains are starting to hurt, with consumer prices tumbling and Swiss stocks lagging behind their European counterparts…………………………………..Full Article: Source

Currency Manipulation: Yet Another Red Herring in the Trade Debate

Posted on 23 April 2015 by VRS  |  Email |Print

The issue – or non-issue – de jour among parties to the free trade debate is currency manipulation by America’s potential trading partners. The U.S. auto industry and its defenders in Congress claim that Japan and some of the other countries negotiating the Trans-Pacific Partnership, or TPP, have a history of devaluing their currencies to the detriment of U.S. exports.
They say U.S. negotiators should insist on inserting punitive language into the TPP text to allow the United States to retaliate against currency manipulation. Senators Rob Portman, R-Ohio, and Debbie Stabenow, D-Mich., introduced legislation today to require that very thing. They represent the two largest auto-producing states……………………………………Full Article: Source

Currency Swings Worry Treasurers in Asia

Posted on 22 April 2015 by VRS  |  Email |Print

The biggest worry for treasurers of Asian companies this year? Currency markets. That’s according to a J.P. Morgan survey that found 40% of treasurers in the region said foreign exchange was their primary concern as they worry that big currency swings could hit global growth over the next year.
Uncertainty around when the U.S. Federal Reserve will raise interest rates, combined with an appreciating dollar, “is creating headwinds for businesses who are significantly exposed to Asian currencies,” said Dianne Challenor, head of treasury services for Asia Pacific at J.P. Morgan, “Margins are being squeezed and hedging strategies are challenging to get right, adding complexity to risk management planning.”………………………………….Full Article: Source

$100s closing in on $1s for most common currency

Posted on 22 April 2015 by VRS  |  Email |Print

Washington and Jackson may be lining your pockets, but Benjamin’s been making a run for the border. One-dollar bills and hundreds make up the vast majority of U.S. currency, according to the 2015 World Almanac. There are 10.7 billion ones in circulation, and 9.7 billion hundreds.
Twenty years ago, hundreds made up only 14 percent of the bills in circulation, now they’re more than a quarter. The other common denominations have all dropped in frequency, except twos which still make up 3 percent of bills…………………………………..Full Article: Source

A single Asian currency?

Posted on 20 April 2015 by VRS  |  Email |Print

A list of 57 countries including Australia have been finalised as founding members of a new multi-billion dollar investment bank being led by China this week. Economist Clifford Bennett says the AIIB could deliver a single currency for Asia, like the Euro, in 15 years time.
“We could have a currency in Asia in 15 to 20 years time which is a kin to the Euro for Europe,” he said. “A lot of people criticise the Euro but it has sustained and survived a major crisis and threat and if we had that scentario in Asia we could be selling our iron ore and copper to China without any upward appreciation on the currency at all and we’d have a far more balanced economy then.”…………………………………..Full Article: Source

China wants to follow rules on currency basket - IMF official

Posted on 20 April 2015 by VRS  |  Email |Print

China does not want to bend the rules in its favour to include the yuan in the IMF’s basket of major reserve currencies, the No. 2 official at the International Monetary Fund said. Beijing tightly controls the yuan’s movements and has strong capital controls, but it is pushing for increased use of the currency for trade and investment as part of a long-term strategic goal to reduce dependence on the dollar and to raise its global economic clout.
That push has centred on the Special Drawing Rights, a basket that now contains dollars, yen, pounds and euros and serves as the IMF’s main unit of account……………………………………Full Article: Source

Greenback remains best currency bet, says BNP

Posted on 16 April 2015 by VRS  |  Email |Print

The US dollar remains the best bet in currency markets this year as the Federal Reserve splits from global peers and moves closer to raising interest rates, according to BNP Paribas.
“It is still a dollar-bull story, in spite of the fact that the economic data in the US has softened,” Robert McAdie, head of research and strategy at BNP Paribas, said in New York on Wednesday. “You have a global environment in which other central banks are trying to keep their currencies competitive, and they’re going to cut.”……………………………………….Full Article: Source

A New Competitor for Bitcoin Aims to Be Faster and Safer

Posted on 16 April 2015 by VRS  |  Email |Print

A Stanford professor claims to have invented a Bitcoin-like system that can handle payments faster and with more security. The total value of the digital currency Bitcoin is now approximately $3.4 billion, and many companies and investors are working to prove that the technology can make financial services cheaper and more useful.
But Stanford professor David Mazières thinks he has a faster, more flexible, and more secure alternative. If Mazières is correct, his technology could make digital payments and other transactions cheaper, safer, and easier—particularly across borders. He released the design for his system in a white paper last Wednesday………………………………………..Full Article: Source

IMF says currency shifts support global economic growth

Posted on 15 April 2015 by VRS  |  Email |Print

Recent shifts in exchange rates should help the global economy, boosting Japan and Europe in particular, amid increasing divergence in the growth paths of the world’s major economies, the International Monetary Fund said on Tuesday.
The Washington-based institution kept its global growth forecasts unchanged, with faster economic expansion in the euro zone and India expected to be offset by diminished prospects in other key emerging markets such as Russia and Brazil. But it cautioned that the economic recovery remains “moderate and uneven,” beset by greater uncertainty and a host of risks, including geopolitical tensions and financial volatility………………………………………..Full Article: Source

Russian ruble becomes world’s best-performing currency

Posted on 15 April 2015 by VRS  |  Email |Print

Between early February and early April 2015, the Russian ruble gained 22.3 percent against key benchmarks, making it the world’s best-performing currency. Experts are not yet convinced that this impressive strengthening of the ruble will become a long-term trend: in December 2014, the Russian currency lost about half of its value against the US dollar and the euro.
Between early February and early April 2015, the Russian ruble gained 22.3 percent, making it the world’s best-performing currency, UFS IC chief analyst Alexei Kozlov has told RIR………………………………………..Full Article: Source

5 myths about currency manipulation and exchange rates

Posted on 14 April 2015 by VRS  |  Email |Print

Most observers overestimate the importance of currency policy. This month, the International Monetary Fund (IMF) may name China’s yuan as one of its reserve currencies. Also this month, Congress could vote on whether to give Trade Promotion Authority (TPA) to President Obama. Then another vote looms on the Trans-Pacific Partnership (TPP).
In these instances and others, currency manipulation will be treated as vital despite the fact that it is not particularly important to the United States. Dispelling myths about exchange rates makes this clearer………………………………………..Full Article: Source

Australia currency union more politics than economics

Posted on 13 April 2015 by VRS  |  Email |Print

With NZ dollar approaching parity with the Australian dollar, the topic of a currency union with our Trans-Tasman cousins has once again emerged. This seems to be a debate that occurs around every fifteen years. The last time it captured the local imagination was just before the euro was formed in 1999. Around that time, Helen Clark said joining a currency union with Australia was “inevitable”.
There are clear pros and cons of going down the path of irrevocably fixing your exchange rate with a large neighbour. On the plus side, importers and exporters to Australia would no longer have to manage the uncertainty of exchange rate volatility………………………………………..Full Article: Source

The curious case of the cash-rate currency trades

Posted on 13 April 2015 by VRS  |  Email |Print

One could almost hear the groans from Martin Place a few seconds before the 2.30pm on Tuesday when the Australian dollar jumped ahead of the Reserve Bank’s atomically precise interest rate decision.
The mysterious trades in the Australian dollar around the RBA’s rates decisions were already a national curiosity and the subject of a two-month-long investigation by the Australian Securities Commission. So when it happened again, the plot thickened – to the frustration of the central bank’s staff………………………………………..Full Article: Source

Currency traders rush to price in UK election uncertainty

Posted on 10 April 2015 by VRS  |  Email |Print

Uncertainty over the outcome of the most closely fought general election in a generation has prompted signs of concern in financial markets, with investors buying up insurance against sharp swings in the value of the pound.
With less than a month to go and little separating the two main parties in the polls, the currency market has registered a pronounced rise in volatility, suggesting investors are preparing for a period of elevated political uncertainty………………………………………..Full Article: Source

Currency Fluctuations Weigh On Asset Bases Of Global Custody Banks

Posted on 10 April 2015 by VRS  |  Email |Print

Global custody banks have had a strong run in recent years, as the slew of stricter rules in the aftermath of the economic downturn has boosted demand for their services. This is because more financial institutions are now turning to custody banks to take care of accounting, back-office and middle-office activities in light of the added complexity in compliance and reporting requirements.
This in turn has helped the assets under custody for the world’s largest custodians grow steadily – earning them handsome fee revenues in the process. However, the size of assets under custody for most custodians took a hit over the last two quarters of 2014 as volatile equity market conditions and the negative impact of marked changes in foreign exchange rates hurt asset valuations in terms of U.S. dollars………………………………………..Full Article: Source

Should You Invest In A Currency-Hedged International Equity ETF?

Posted on 09 April 2015 by VRS  |  Email |Print

In the United States, most international equity funds do not hedge their foreign currency exposure. This long exposure to foreign currencies contributed to the performance of these funds in the past decade, as the U.S. dollar weakened against major currencies.
More recently, currency movements have reversed, starting with a sharp decline of the yen over the past three years, and the more recent gradual decline of the euro versus the U.S. dollar. This trend is now weighing on the returns of currency-unhedged international equity funds. Not surprisingly, these currency movements have prompted strong flows into currency-hedged exchange-traded funds over the past two years………………………………………..Full Article: Source

Currency wars: is the US the new victim?

Posted on 09 April 2015 by VRS  |  Email |Print

What goes around comes around. In September 2010, Guido Mantega, then Brazil’s finance minister, popularised the term “currency wars”. He claimed governments around the world — led by the US — were engaging in competitive devaluations of their currencies . Brazil and other emerging markets, which were doing better at the time, suffered overvalued currencies as a result.
Fast forward to today and the US dollar has appreciated on a trade-weighted basis at a faster pace for the past eight months than during any similar period since the end of the Bretton Woods system in 1971. This year, more than 20 central banks have eased monetary policy, including the European Central Bank, which at long last launched its quantitative easing programme………………………………………..Full Article: Source

Currency Hedging? Individual Investors Shouldn’t Bother

Posted on 09 April 2015 by VRS  |  Email |Print

As it has been so frequently noted in the financial press, last year the U.S. dollar appreciated significantly against most foreign currencies, including the widely quoted benchmark euro. For investors with a portion of their portfolio in unhedged international stocks, this caused some short-term pain.
For illustrative purposes, let’s expand the discussion beyond the euro to examine a broader basket of foreign currencies against which to assess the U.S. dollar’s movement relative to foreign currencies. Going back to 1998 with MSCI data, you can observe wide swings–in both directions–on an annual basis………………………………………..Full Article: Source

Denmark Stays Out of Currency Market

Posted on 08 April 2015 by VRS  |  Email |Print

Denmark’s central bank refrained from intervening in the foreign-exchange market in March, in a sign that the national currency has stabilized against the euro following weeks of volatility brought on by the European Central Bank’s stimulus efforts.
The Danish central bank has been battling to stabilize the exchange rate, its core task, since January, when the ECB announced a vast program of bond purchases, intended to bring economic growth, that sent the euro plummeting against other currencies………………………………………..Full Article: Source

Are Currency Swings Worth the Worrying?

Posted on 08 April 2015 by VRS  |  Email |Print

Most mutual-fund investors pay little attention to swings in exchange rates, but for investors in international stock or bond funds, recent moves in the currency markets have been hard to ignore. The question for investors: Should they do anything about it?
Consider the first-quarter rally in the core European stock markets. Germany’s DAX rose 22%, and France’s CAC-40 gained nearly 18%. Markets in Spain, Belgium and Ireland were also up well into the double digits………………………………………..Full Article: Source

Hottest ETFs are currency hedges, non-US funds

Posted on 07 April 2015 by VRS  |  Email |Print

Exchange-traded funds have surged in popularity in 2015, but it’s not U.S. equities that are leading the charge. Investors poured $97.2 billion into various ETFs and other similar products in the first quarter, marking the $2.9 trillion industry’s biggest start ever despite a wobbly U.S. stock market and a testy geopolitical climate, according to data from BlackRock, the world’s largest provider of such funds. (U.S.-based ETFs have about $2.1 trillion in assets.)
There essentially have been three major investment themes this year, and players in the exchange-traded market have made each work: A quest for investment themes outside the U.S.; the offshoot of that, which has seen domestic attention turn away from large caps and toward mid- and small-sized companies, and capitalizing on the big moves in currency markets, particularly an appreciation of the U.S. dollar and the decline of its global competitors………………………………………..Full Article: Source

Vexed questions on currency hedging

Posted on 07 April 2015 by VRS  |  Email |Print

To hedge or not to hedge? That is not the only question regarding the currency risks that come with investing across borders. If one gets past the “whether to hedge” question, there is also the “when” and the “how”. Investors in a popular exchange traded fund may not be so much hedged against a rising dollar as leveraged to it, something that could become apparent if the dollar rally runs out of steam.
These have become increasingly vexatious questions for equity investors. It has become a mantra for advisers that clients should be diversified geographically as well as by sector, even though most stock markets contain enough multinational companies to provide exposure to the global economy beyond domestic borders………………………………………..Full Article: Source

Once Over $12 Trillion, the World’s Currency Reserves Are Now Shrinking

Posted on 07 April 2015 by VRS  |  Email |Print

The decade-long surge in foreign-currency reserves held by the world’s central banks is coming to an end. Global reserves declined to $11.6 trillion in March from a record $12.03 trillion in August 2014, halting a five-fold increase that began in 2004, according to data compiled by Bloomberg.
While the drop may be overstated because the strengthening dollar reduced the value of other reserve currencies such as the euro, it still underlines a shift after central banks — with most of them located in developing nations like China and Russia — added an average $824 billion to reserves each year over the past decade. Beyond being emblematic of the dollar’s return to its role as the world’s undisputed dominant currency, the drop in reserves has several potential implications for global markets………………………………………..Full Article: Source

Currency union unlikely in near future - expert

Posted on 07 April 2015 by VRS  |  Email |Print

The New Zealand dollar is approaching parity with its Australian counterpart and could be worth more by the end of today. The NZ dollar was worth about 99.4 Australian cents this morning and over the weekend went as high as 99.7c.
The Reserve Bank of Australia is expected to drop its benchmark interest rate today, which could see the Aussie drop further. The New Zealand dollar is at its highest level since 1985, when the dollar was floated. “It makes in incredibly cheap to go to Australia but exporters to Australia are being hurt badly by this,” said Derek Rankin, of Rankin Treasury Advisory………………………………………..Full Article: Source

Europe’s Currency Manipulation

Posted on 02 April 2015 by VRS  |  Email |Print

The Transatlantic Trade and Investment Partnership (TTIP), which the European Union and the United States currently are negotiating, would, studies say, boost welfare and reduce unemployment in both economies, as well as in other countries. At the same time, the TTIP could help to restore confidence in Europe and the transatlantic community. But there is one major barrier to realizing these benefits: the euro.
The problem stems from currency manipulation. Over the past three decades, the US has de facto tolerated currency manipulation by its major Asian trading partners, which built up large trade and current-account surpluses by suppressing the value of their currencies………………………………………..Full Article: Source

China not quite ready for IMF currency basket

Posted on 01 April 2015 by VRS  |  Email |Print

The United States feels China’s yuan does not yet meet the standards for inclusion in the International Monetary Fund’s basket of global currencies, Treasury Secretary Jack Lew said on Tuesday. The yuan’s inclusion in the basket, which defines the value of the IMF’s reserve assets, would add to China’s global status while encouraging more central banks to hold the currency.
Currently the basket includes the dollar, the yen, the euro and the pound, and the IMF is reviewing the composition of the basket this year. Officials at the international lender look for a currency to be used heavily in international trade as well as freely convertible. Lew said that China had more work to do………………………………………..Full Article: Source

Eurozone: Welcome to your currency board future

Posted on 01 April 2015 by VRS  |  Email |Print

Citi’s Chief Economist Willem Buiter spent some time with FT Alphaville explaining why he believes Draghi’s concession on profit and loss sharing among ECB member national central banks turns, in all likelihood, the single monetary unit into nothing more than a glorified currency board.
Quick background: The ECB’s profit-and-loss sharing mechanism became a key negotiating point ahead of European QE. For the Bundesbank, QE was only viable if NCBs assumed most of the responsibility for losses on assets they brought into the consolidated balance sheet. In the end Draghi acquiesced by reducing risk-sharing to only 20 per cent of assets………………………………………..Full Article: Source

Use of China’s Yuan as Global Payment Currency Falls

Posted on 31 March 2015 by VRS  |  Email |Print

China suffered a second setback in as many weeks in its drive to boost the use of its currency abroad, even as the country steps up efforts to open up its capital account. The use of the Chinese yuan as a currency for world payments fell two places to seventh in February, with a share of 1.81%, according to the Society for Worldwide Interbank Financial Telecommunication, or Swift, in a report Monday.
That compares with a record-high 2.17% in December, according to the organization that is used by banks to coordinate international transactions. The 20.4% drop compared with January is a reversal from November when the yuan broke into the top five of world payment currencies last year, overtaking the Canadian dollar and Australian dollar by value………………………………………..Full Article: Source

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