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How long before the cracks show in China’s great currency wall?

Posted on 25 February 2016 by VRS  |  Email |Print

China still owns the world’s largest currency reserves, but it has been burning through them at such a pace that some think Beijing might soon have to allow a sharp fall in the yuan or back-pedal on liberalisation and tighten its capital controls.
Foreign exchange reserves in China declined $99.5 billion in January to $3.23 trillion, following a record fall the previous month, and have shrunk by $762 billion since mid-2014, more than the gross domestic product of Switzerland………………………………………..Full Article: Source

Nigeria urged by IMF to devalue currency

Posted on 25 February 2016 by VRS  |  Email |Print

Nigeria’s central bank should allow the local currency to devalue as part of a package of aggressive economic policies to reverse the impact of low oil prices on Africa’s biggest economy, the International Monetary Fund said Wednesday.
The IMF said Nigeria’s economy would grow by 4.9% in 2017 from 3.2% this year as long as the government takes immediate action to cut spending and better manage the naira, its national currency. Traders have turned against the naira as global oil prices have plummeted, betting that Africa’s top crude producer would struggle to replace the revenue it uses to fund 80% of its budget………………………………………..Full Article: Source

ETF flows prompt bounceback for gold

Posted on 24 February 2016 by VRS  |  Email |Print

Gold rebounded as money flowed back into exchange traded funds but analysts cautioned that the gains might be limited without physical demand from India and China. The precious metal has been one of the best-performing commodities this year, rising 15 per cent thanks to flows into gold-backed exchange traded funds.
Investors have bought more tonnes of gold through ETFs this year than they sold during the whole of last year, amid a search for haven assets amid sinking stock markets and negative central bank interest rates. Holdings in gold-backed ETFs have risen 49.8 tonnes over the past two days, the biggest two-day increase since May 2010 during the eurozone debt crisis, according to data compiled by Bloomberg………………………………………..Full Article: Source

These Commodity Currency ETFs Outpacing Dollar to Start 2016

Posted on 24 February 2016 by VRS  |  Email |Print

The global market upheaval triggered off by China hit the most risky asset classes at the start of 2016, instigating a flight to safety. Also, the uncertainty in the oil patch and growth worries in Japan and Euro zone made matters worse. Back home, the economic health suffered as several recent readings came in soft.
The US economy cooled off in Q4 with the annualized growth pace of 0.7% missing the market estimate of 0.8% and falling sharply from the prior quarter’s expansion of 2%. A stronger greenback, sluggish manufacturing activity and weak consumer spending weighed on U.S. economic growth. This held the Fed back from showing too much aggression on the policy tightening issue………………………………………..Full Article: Source

Japan Considers Regulating Bitcoin as Currency

Posted on 24 February 2016 by VRS  |  Email |Print

Regulators in Japan have reportedly proposed treating digital currencies like bitcoin as methods of payment, a distinction that would make them legally equivalent to conventional currencies in the country.
According to a report by Nikkei, Japan’s Financial Services Agency (FSA) is considering whether to make revisions to legislation that would classify digital currencies as “fulfilling the functions of currency”. “They are now recognized as objects but are not treated on a par with their more established counterparts,” the report states……………………………………….Full Article: Source

Barclays Says Sharp Yuan Devaluation Needed to Shift Psychology

Posted on 24 February 2016 by VRS  |  Email |Print

A sharp, one-off devaluation of the yuan is among options China’s central bank might consider to stem capital outflows and shift market psychology to appreciation from depreciation, according to Barclays Plc.
The risk of such a move, which Barclays says would need to be in the region of 25 percent to alter perceptions, is rising as China’s foreign-exchange reserves plunge, analysts Ajay Rajadhyaksha and Jian Chang wrote in a report………………………………………..Full Article: Source

G-20 Likely to Reiterate Currency Commitments

Posted on 23 February 2016 by VRS  |  Email |Print

Global financial leaders likely will reiterate previous currency policy commitments, a senior U.S. Treasury official signaled Monday, despite concerns that lackluster growth around the world may tempt some countries to use devalued currencies to juice exports.
A senior U.S. official, speaking ahead of a gathering of finance ministers and central bankers from the Group of 20 largest economies in Shanghai later this week, said exchange-rate commitments in previous G-20 communiqués have been “constructive and helpful, and I think nicely articulate the rules of the game.”……………………………………….Full Article: Source

Getting Rid of Big Currency Notes Could Help Fight Crime

Posted on 23 February 2016 by VRS  |  Email |Print

Few Europeans use the 500-euro note, and most Americans rarely encounter the $100 bill. Yet hundreds of millions of these notes are in circulation around the world, where they are often used by drug cartels, corrupt politicians, terrorists and tax cheats to evade law enforcement.
That’s why officials in Europe and elsewhere are proposing to end the printing of high-denomination bills. Getting rid of big bills will make it harder for criminals to do business and make it easier for law enforcement to detect illicit activity………………………………………..Full Article: Source

China can’t escape its currency bind

Posted on 22 February 2016 by VRS  |  Email |Print

China is being forced to choose between capital controls, interest rate independence and maintaining control over the value of its currency. What do bicycles and the Chinese economy have in common? The answer; you can’t have it all. When buying a bike you have three options; cheap, light and strong — but the dilemma is you can only choose two, for example, if you want it light and strong, it won’t be cheap, and vice versa.
In a similar vein, as the Chinese government forges ahead with attempts to liberalise its economy, it’s facing the hard reality that it cannot control both interest rates and exchange rates and still have an open capital account. This is often referred to as the impossible-trinity, or trilemma, and no economy is immune………………………………………..Full Article: Source

Chaos For Currency Markets

Posted on 19 February 2016 by VRS  |  Email |Print

2016 has been a challenging year so far for currency markets. Events ranging from consistently poor global stock market performance to U.S. recessionary fears have applied long-term pressure to global growth, and currency markets have been suffering as a result.
The U.S. central bank’s decision in December 2015 to raise interest rates by 0.25% was initially seen as a mark of improvement for its economy. However, rising interest rates pose a problem for borrowers, potentially lowering economic activity………………………………………..Full Article: Source

UAE-India mull currency swap as rupee sinks to lifetime low

Posted on 18 February 2016 by VRS  |  Email |Print

UAE Central Bank has signed an agreement with its Indian counterpart, the Reserve Bank of India (RBI), to enter into a Currency Swap Agreement, which is aimed at strengthening economic ties with the Asia’s second largest economy. The Indian rupee sank to 18.70 against the UAE dirham at 11.30am UAE time this morning ( February 17, 2016), making a lifetime low.
A currency swap (or a cross-currency swap) is a foreign exchange derivative between two institutions to exchange the principal and/or interest payments of a loan in one currency for equivalent amounts, in net present value terms, in another currency………………………………………..Full Article: Source

China’s Currency Test: Can It Get Capital Controls Right?

Posted on 18 February 2016 by VRS  |  Email |Print

To reform or not to reform: That is the question in China these days. The country is weighing a key decision over whether to simply loosen restrictions on its highly controlled capital account, or to make the yuan, also known as the renminbi (RMB), or “people’s money,” a fully convertible international currency.
Beijing’s dilemma over whether to accelerate the slow evolution toward full convertibility sharpened in August when the government devalued the yuan by almost 2%, catching the markets by surprise………………………………………..Full Article: Source

Commodity currencies hit by oil price fragility

Posted on 17 February 2016 by VRS  |  Email |Print

Fragility returned to stalk the currency market and kill off the brief revival in optimism as traders returned to haven assets and steered clear of riskier commodity-related foreign exchange.
The more upbeat mood of the end of last week was maintained into Monday after reassuring comments from the People’s Bank of China about exchange rate policy, which drove the renminbi higher. But on Tuesday the market was back on familiar shaky ground. A 6 per cent rise in Brent crude disappeared after the market dismissed the relevance of a putative deal between Saudi Arabia, Russia, Venezuela and Qatar to freeze oil output………………………………………..Full Article: Source

China’s double whammy just a gentle move, no devaluation of yuan

Posted on 17 February 2016 by VRS  |  Email |Print

Tales of woe are everywhere so far this year, but here’s something to take off the worry list: talk of a major devaluation in the yuan is way over the top and although credit risks are rising in China there’s no crisis on the horizon.
Financial markets have been consumed by a further fall in the yuan, the growing possibility of a major slowdown in China that has been fuelled by concerns over debt levels and talk Chinese banks could lose as much as $US3.5 trillion. And those fears are not without good reason………………………………………..Full Article: Source

China’s options to try to dodge a currency crisis

Posted on 17 February 2016 by VRS  |  Email |Print

China is in the midst of a high-wire balancing act over the yuan. The currency plunged against the dollar at the start of this year, fueling turmoil in markets around the world. But it has recently clawed back much of those losses, leaving investors guessing on where it’s headed next.
Despite some recent reforms, Beijing still retains significant control over trading in the yuan. But its task has become a lot trickier amid slowing economic growth and efforts to gain global acceptance of its currency. Huge sums of capital have poured out of China, and the country’s central bank has had to delve into its foreign-currency war chest to prop up the yuan………………………………………..Full Article: Source

Do Not Plan For China To Do A Massive One-Time Currency Devaluation

Posted on 16 February 2016 by VRS  |  Email |Print

There has been a lot of speculation over the past few months that China will do a massive 15% to 20% devaluation of its currency (Renminbi or Yuan) since it is much stronger than the US Dollar and Japanese Yen.
The discussion on this topic picked up when the Chinese government did a surprise devaluation of almost 2% on August 11 last year and another 1.6% the next day. It also announced that the Renminbi could move up or down 2% per day. However for about the next four months until early December the Renminbi didn’t end up changing by very much………………………………………..Full Article: Source

Global currency wars a risky zero-sum game for world economy

Posted on 16 February 2016 by VRS  |  Email |Print

Global policymakers are digging themselves into a very deep hole with few viable exit plans. Growing turmoil on financial markets and deepening world economic gloom is leading policymakers to turn to desperate measures to beat the downturn.
Pumping the global economy with huge infusions of quantitative easing money and driving interest rates into negative territory are proving less effective in stopping the rot. The worry is the world’s central banks and governments are being tempted into competitive currency devaluation as a last resort to reboot faster growth………………………………………..Full Article: Source

Gold bullion or gold equities?

Posted on 15 February 2016 by VRS  |  Email |Print

Financial-market turmoil is strengthening the case to add gold exposure to portfolios as more “insurance” in the event of a sharper equities market sell-off. It is also providing an opportunity to capitalise on the precious metal’s improving medium-term prospects.
Gold’s role as a ‘safe-haven’ has come to fore this year. The US-dollar gold price has rallied from a low of US$1050.72 an ounce this year to about US$1,200. The all-important Australian-dollar gold price (for local producers) has rallied from A$1450 an ounce in early 2016 to A$1,695………………………………………..Full Article: Source

How the yuan crisis could forge a new currency order

Posted on 15 February 2016 by VRS  |  Email |Print

The pace of decline in China’s external currency reserves is accelerating, feeding panicky selling of the yuan and heralding a likely change in China’s exchange rate arrangements. Exchange rate pressures in China are spilling over to regional currencies and global stock markets.
In January alone, China lost $US99.5 billion of its dollar reserves trying to keep the yuan in its 2 per cent official fluctuation band around 6.5419 to the US dollar. In just 15 months the Chinese have lost more than $US650 billion in reserves, more than the total reserves of any other country save Japan………………………………………..Full Article: Source

China bank chief says ’speculators’ caused yuan fall

Posted on 15 February 2016 by VRS  |  Email |Print

Chinese central bank governor Zhou Xiaochuan has accused “speculative forces” of targeting the country’s currency, the yuan. He said there was no reason for the yuan to keep depreciating in value and that China would not let international speculators dominate market sentiment.
Zhou’s remarks come as Chinese markets prepare to reopen on Monday after a week-long New Year holiday. Efforts to defend the yuan have eroded China’s foreign currency reserves………………………………………..Full Article: Source

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

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