Archive for category Currency
«Probably inevitable» a country will exit euro: Soros
Posted by Oksana Grebenjuk in Currency on Июнь 30th, 2011
Billionaire investor George Soros thinks a country will eventually exit the euro zone and urged policymakers on Sunday to come up with a «plan B» that could rescue the European Union from looming economic collapse.
Soros, famous for making $1 billion by betting against the British pound in 1992, did not name any country he thought might exit the currency, but speculation is mounting about the fate of Greece as its politicians struggle to agree more austerity measures demanded by international lenders as the price for staving off bankruptcy.
Soros reiterated his view in a panel discussion in Vienna that the euro had a basic flaw from the start in that the currency was not backed by political union or a joint treasury.
«The euro had no provision for correction. There was no arrangement for any country leaving the euro, which in the current circumstances is probably inevitable,» he said.
While he called survival of the European Union a «vital interest to all,» he said the EU needed structural changes to halt a process of disintegration. Read the rest of this entry »
Despite the party, global policymakers poles apart
Posted by Oksana Grebenjuk in Currency on Февраль 7th, 2011
Even after their annual Alpine get-together, global policymakers cannot agree which of the risks facing the world economy are most pressing let alone decide how to tackle them.
While there was broad agreement that the worst of the euro zone debt crisis has passed, countless panel discussions and bilateral meetings at the World Economic Forum in Davos did little to narrow differences of opinion over the threat of inflation to the global recovery and the imbalances associated with deficits and exchange rates.
The financial crisis forced policymakers to look into the abyss and work together to prevent the global economy going into meltdown. The recovery is seeing countries operating more independently.
«At the early stages of the financial crisis, at G20 level, there was a lot of talk of coordination … I think now everybody is going their own way,» Turkish Finance Minister Mehmet Simsek said during one of the Forum’s panel discussions.
«That’s an issue, that’s a problem,» he said. «Global imbalances are there, probably to grow.»
Turkey is one of a growing number of emerging market nations that have acted to stem «hot money» inflows destabilising their economies. Asian and Latin American nations have done the same, pointing the finger at the United States for flooding the world economy with newly-printed money. Read the rest of this entry »
Brazil’s Rousseff criticizes currency protectionism
Posted by Oksana Grebenjuk in Currency, Favourites on Февраль 3rd, 2011
Emerging market countries such as Brazil and Argentina must take a stronger position against «competitive depreciations,» Brazilian President Dilma Rousseff told Argentine newspaper Pagina 12 on Sunday.
Rousseff, who is due to visit the neighboring country on Monday in her first foreign visit as president, said multilateral bodies should tackle currency issues and developed countries must «assume their responsibility.»
The Brazilian real currency BRBYBRL= has gained more than a third against the dollar in just over two years, and the finance minister has blamed the rally on the developed world, slamming the United States for keeping interest rates low and the dollar weak through its quantitative easing policy.
«It’s well known that Brazil and Argentina suffer, that all emerging market countries suffer, as a result of the depreciation policy practiced by the countries in question,» Rousseff said when asked about the role of the United States and of China.
«Our position in the G20 needs to be one of increasing reaction against these depreciations, which always lead to difficult situations in the world. I’m talking about the so-called competitive depreciations,» she added. Read the rest of this entry »
Euro crisis far from over
Posted by Oksana Grebenjuk in Currency, Favourites on Декабрь 21st, 2010
The euro crisis is far from over and the peripheral members of the euro zone should temporarily exit the currency bloc and get their financial houses in order, said a Pimco bond fund manager. Otherwise, current policies are ineffective in the absence of fiscal unity and will likely lead to a break-up of the euro.
In an interview with the German newspaper Die Welt, Munich-based Andrew Bosomworth warned that “market tensions” will persist into the new year and that the new “permanent bailout- mechanism” proposed by euro zone finance ministers has arrived too late since it will not become applied until 2013.
He cites that the European Union should have sought a more urgent solution to the problems of debt-stricken euro members.
«Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments,» he said. He suggested that these countries could begin fixing their financial and debt problems by re-adopting their original currencies, thereby enabling them to sell their exports cheaper to other countries.
Bosomworth also complains that by forcing weaker euro zone members to adopt harsh austerity programs defeats the purpose since they make it difficult for these nations to grow their economies and stabilize their debt. Read the rest of this entry »
The European Situation And The Financial Markets
Posted by Oksana Grebenjuk in Currency, Favourites on Декабрь 1st, 2010
Are the financial markets the WikiLeaks of economics? Politicians and economists and business people ignore what financial markets are saying at their peril.
The financial markets have not responded well to the «rescue» package for Ireland put together by the European Union. The news out of London: «The euro continued to slide Tuesday, falling to a 10-week low under $1.30 as Italian, Spanish, Portuguese and Irish bond-yield spreads all continued to widen relative to Germany.»
«The euro had started the European day with a rally, helped by regular month-end flows in its favor. However, things turned sour again as it became apparent that the risks of contagion remained as strong as ever and that Italy is now being affected by the lack of investor confidence in the euro zone.
Like the debtor countries on the periphery, Italy watched the yield on its bonds rise relative to those of Germany as investors demanded greater returns for holding Italian debt.»
The Financial Times writes: «it is still hard to see how Ireland can repay all the debt it has now taken on. So it is unsurprising that the market sensed a fatal combination: governments lacked the means either to nix moral hazard or end the crisis by writing an enormous check.» Read the rest of this entry »
Who Can Print More Money — FED or BoJ?
Posted by Oksana Grebenjuk in Currency on Ноябрь 8th, 2010
Not that long ago central banks were in a race who can slash interest rates to zero first. Seems like a distant memory, but the Bank of Japan was the winner then. Now a new competition is shaping up – who can print more (funny) money. So far the FED is leading, after revealing details of the next round of QE. This time it is $600 billion, about a $100 billion more than had been previously hinted. On balance, though, it is not much of a difference. At this stage of the game, what is $100 billion, really? FED does not have neither amount and must create the money with a few keystrokes, otherwise known as «printing».
In response, the Bank of Japan announced own scheme of easing. It is smaller, at about $62 billion, but it can always be increased. However, the BoJ plans to spend it in other ways than its US counterpart. It is getting even more adventurous. Instead of simply buying bonds, the BoJ also wants to purchase Japanese real-estate investment trusts, ETF’s tracking Nikkei 225 and Topix, as well as corporate debt. Looks like weakening the Yen is not the only objective, but the central bank is also engaging in «pumping» the domestic stock market.
All moves by the FED are being mimmicked by the BoJ. To a smaller degree for now, but they are likely to increase the buying spree soon. Most would argue that so far all those efforts had no impact on the Yen. Perhaps, but while the JPY has not reversed against the Dollar, it became, for all practical purposes, pegged to the USD. Over the last three weeks, the USD-JPY has been trading in a 200 pips range in a situation similar to 2004, when it was stuck at just above 100 level. This can easily last for few more weeks, or months, until one of the central banks eventually prints enough money to completely degrade its currency. At that time we will have a dubious winner of this competition. Read the rest of this entry »
The Dollar Is A Third-Rate Currency
Posted by Oksana Grebenjuk in Currency on Октябрь 25th, 2010
To many investors’ surprise, the Yankee dollar’s earned only a third-place ribbon for its depreciation against gold over the past 12 months.
With all the recent hoopla and headlines about gold making new highs against the greenback, the destruction derby of the world’s reserve currencies is actually won by the euro, with sterling close behind.
Over the past year, the U.S. dollar lost 29.8 percent vs. bullion compared with a 39.7 percent tumble for the European common currency and a 34.5 percent decline in the British pound. Bringing up the rear is the Swiss franc, with a 23.1 percent loss, and the Japanese yen, which gave up 16.4 percent to gold.
Oddly enough, the U.S. dollar’s the least volatile reserve currency when it comes to bullion purchasing power. Its standard deviation is just 15.3 percent over the past year. This may not seem like a testament to the Fed’s steady hand on the nation’s economic tiller, but it’s something. It actually bespeaks the wait-and-see attitude of the central bank after last year’s stimulus and accommodation.
The likelihood of Fed intervention increases when commodity prices—a basic metric of inflation—rise or fall significantly compared with Treasury securities. In the chart below, the red Fed Indicator line dances within a neutral zone—a condition that compels the central bank to watch, but not act. A sustained move in the indicator above the upper band would signal an increased likelihood of accommodation—or lower money rates and a weaker dollar. A dip below the lower band flashes a higher probability of tightening, or higher rates and a stronger dollar. Read the rest of this entry »
Yen falls as BoJ surprises markets with rate cut
Posted by Oksana Grebenjuk in Currency on Октябрь 7th, 2010
The Bank of Japan (BoJ) surprised financial markets on Tuesday by cutting policy rates to zero and announcing an emergency 35 trillion yen monetary easing program.
Announcing a comprehensive monetary easing policy at the end of its two-day Monetary Policy Meeting on Tuesday, BoJ stated clearly it is pursuing the virtually zero interest rate policy and that it will maintain the policy until it is convinced that price stability is in sight.
A BoJ statement said the central bank will «encourage the uncollateralized overnight call rate to remain at around 0 to 0.1 percent, effective immediately.»
As part of further monetary easing, the central bank said it will add 30 trillion yen lending facility to provide banks with cheap loans. The central bank also said it was setting up a temporary 5 trillion yen ($60 billion) fund to buy Japanese government bonds, short-term government securities, commercial papers and corporate bonds.
The decision to lower the policy interest rate was unanimous. Read the rest of this entry »
Brazil’s finance minister warns of international ‘currency war’
Posted by Oksana Grebenjuk in Currency on Октябрь 1st, 2010
Brazil’s finance minister Guido Mantega has warned that an «international currency war» is currently being waged.These mutual moves at competitive devaluation, Mantega said in a speech in Sao Paulo, were tantamount to a new trade war.
«We’re in the midst of an international currency war,» he said. «This threatens us because it takes away our competitiveness. The advanced countries are seeking to devalue their currencies.»
Brazil’s own currency, the real, is presently at a 10-month high against the U.S. dollar (having appreciated 40 percent from its lows in early 2009) amidst comments that the real is among the world’s most overvalued currencies. The real is extremely attractive to foreign investors due to Brazil’s high interest rates and torrid pace of economic growth.
The historic $70-billion share offering by Brazil’s state-owned oil company, Petrobras, prompted a further massive inflow of money into the country.
Mantega’s comments come on the heels of moves by various governments around the world — including Japan, South Korea, and Taiwan — that have intervened in order to weaken their currencies and improve exports. Read the rest of this entry »
Euro rises, but for the wrong reasons
Posted by Oksana Grebenjuk in Currency on Сентябрь 29th, 2010
Since early June, the euro has made an impressive rebound against the U.S. dollar, rising from a low of EUR/USD 1.1876 to EUR/USD 1.3489, a 13.5 percent climb.
At first glance, this seems to indicate that investors are more confident about Europe’s sovereign debt problems. On Tuesday, Spanish prime minister José Luis Rodríguez Zapatero, in a Wall Street Journal interview, even remarked that Europe’s debt crisis «has passed.»
However, the market says otherwise, according to Andrew Balls, head of PIMCO’s European investment team.
For the sovereign debt of peripheral European countries — namely Greece, Portugal, Ireland, and Spain — the cost of insuring them against default have actually gone up in recent months.
For example, the spread on Ireland’s five-year debt has breached 500 basis points this week, compared with 200 basis points late April and 250 basis points early May, said Balls. Read the rest of this entry »
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Big Banks Easing Terms on Loans Deemed as Risks
6 Июль 2011
Euro Area Backs Greek Aid, Looks to New Bailout
4 Июль 2011
Americans may hit gas again after reserve release
29 Июнь 2011
Obama takes flak for tapping emergency oil reserves
28 Июнь 2011
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