Posts Tagged 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 »
A new global food crisis looms
Posted by Oksana Grebenjuk in Budget on Февраль 23rd, 2011
Soaring food prices, which the World Bank says have hit «dangerous levels,» have thrust the issue of food security sharply into the global spotlight over the past week.
From Asia to the Middle East and to Latin America, the trends of food prices have aroused widespread public concerns globally and in the developing world in particular.
World Bank Group President Robert B. Zoellick warned on Tuesday: «Global food prices are rising to dangerous levels and threaten tens of millions of poor people around the world.»
Rising food prices have driven an estimated 44 million people into poverty in developing countries since last June, as food costs continue to rise to near 2008 levels.
The latest edition of Food Price Watch, a research publication by the World Bank, showed that its food price index rose by 15 percent between October 2010 and January 2011. It is 29 percent above its level a year earlier and only 3 percent below its 2008 peak.
Then what are the main factors behind the food price spikes?
The answer lies in the ultra-loose monetary policy of the United States, the financialization of the global farm produce market, the development of biofuels and the extreme weather events affecting harvests in the world’s main grain-producing areas. 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 »
What The Fed Does not Want You To Know
Posted by Oksana Grebenjuk in Budget on Ноябрь 17th, 2010
Yesterday gold and silver staged a sharp reversal day after first making new highs for the year intra-day. There were a couple of reasons for the sharp pullback. The first was the stronger U.S. Dollar Index and the second was the sudden increase in margin requirements for silver. While we are not sure why the margin requirements increased for silver so suddenly we do know why the U.S. Dollar Index traded higher.
The U.S. Dollar Index caught a bid yesterday due to the fact that Ireland and Portugal bunds spreads are the widest they have ever been. In other words these two countries are in serious trouble. Other European Union countries remain in trouble and could soon face defaults as well.
In March, April, May, and June of this year gold and the U.S. Dollar Index actually rallied higher together. So please understand that gold does not just trade inverse to the U.S. Dollar Index. Gold and silver are now being viewed by the investor community as the only true form of currency.
While many say gold is in a bubble this simply does not hold any merit. A bubble occurs when everyone owns something such as a tech stock in 1999 or a house in 2005. Ask your next door neighbor if they own any gold outside of their jewelry and the answer is likely to be ‘no’. If gold was not so important the government would not want to tax it as a collectible at the highest rate allowed. Read the rest of this entry »
Currency War: “The Worst of Wars”
Posted by Oksana Grebenjuk in Budget on Ноябрь 1st, 2010
The United States is the lead negotiator in trying to convince China to revalue its undervalued yuan. But U.S. officials are simultaneously operating under the growing perception that it may be seeking a weaker currency of its own — by planning for another round of quantitative easing — thereby threatening its credibility.
That’s why U.S. Treasury Secretary Tim Geithner made a strategic move to influence the G-20 agenda. He preceded the formal meetings last weekend with a letter to his G-20 counterparts, recommending a unified position and the language for G-20 opposition to the growing currency tensions in the world.
And for the most part, it worked.
Here’s the key take-away from the final G-20 communiqué and what it could mean for the direction of markets …
First, the communiqué said that they «met with a sense of urgency.» In fact, an ECB policymaker later called the dangerous currency wars «the worst of wars, because at the end there is no winner.»
This is significant …
The last time they made such a statement of urgency was when the euro was on the edge of a cliff. It coincidently bottomed the first trading day after meetings concluded. 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 »
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 »
Japanese export growth slows again in August
Posted by Oksana Grebenjuk in Trading Markets on Сентябрь 28th, 2010
Japan’s growth in exports slowed for a sixth consecutive month in August, another signal that the nation’s economic recovery is running out of gas, while the yen remains at a persistent 15-year high against the dollar.
Exports climbed 15.8 percent on an annual basis, compared with a peak 45.3 percent surge in February.
The slowdown in exports comes amidst moves by the Bank of Japan to intervene to soften the strengthening yen, while a political dispute with China keeps growing.
Exports to other Asian countries, which represent for more than half of Japan’s total export business, rose 18.6 percent, significantly slower than the 23.8 percent increase in July.
Exports to China grew by 18.5 percent in August, down from a 22.7 percent annual increase in July.
Meanwhile, Japanese exports to the U.S. rose by 8.8 percent from a year earlier, far below the 25.9 percent climb recorded in July. Read the rest of this entry »
Is A Global Reserve Currency A Necessity?
Posted by Oksana Grebenjuk in Currency, Favourites on Июнь 28th, 2010
Recently Asian Development Bank (ADB) suggested, China’s yuan could rapidly become an internationally used currency and serve as an alternative to the U.S. dollar in central bank reserves. There weren’t many takers for ADB’s suggestion. I beg to differ from ADB’s stance. If China’s yuan becomes a reserve currency then, I ask, is there a guaranty that we won’t see another global financial crisis of the present order? In the wildest of possible pollyannaism, even ADB wouldn’t say that replacement of one reserve currency (US Dollar) with another (China’s yuan) would guarantee us a world free of a future global financial crisis of the present order. At best, I guess, that would be a temporary solution.
I think it is high time we ask the fundamental question – do we need a global reserve currency? Yes of course, there are significant economic incentives in agreeing to have a global reserve currency. But, hasn’t the concept of international reserve currency outlived its usefulness? I, for one, definitely believe so.
A decade ago, in the wake of the Asian financial crisis, Malaysia’s former Prime Minister, Dr Mahathir Mohammed, called on the world to ban currency trading and outlaw hedge funds, which he blamed for spectacular declines in the value of the Malaysian ringgit. His comments focused on the fact that currency trading served no tangible economic purpose and that hedge funds were opaque beasts wielding billions of dollars in vested interests. Though, I don’t agree with his thoughts in toto, I must say his thoughts did inspire me to ask the fundamental question — do we need a global reserve currency? Whatever, one’s answer to the above question may be, there is a broad consensus in the world that the global central banks are risking too much by holding much of their reserves in dollars. The consensus is so strong; there have been a rush of proposals such as — replacing greenback with a new reserve currency system based on the IMF’s special drawing rights; or a more coordinated approach to exchange rate policy involving target zones etc. There are plusses and minuses in all those proposals. But scrapping a global trade based on the concept of international reserve currency seems to be a better idea than all those proposals. Read the rest of this entry »
Bank Issues, Jobs Data Drives Euro To 4-Year Low
Posted by Oksana Grebenjuk in Currency on Июнь 8th, 2010
After holding steady for a few days, the Euro plunged through the recent bottom to post a 4-year low. This morning’s move came as a surprise to many traders who had expected the single-currency to hold its range until after the release of the employment number.
Traders are saying that this morning’s sharp break was a reaction to new concerns about the health of European banks. Investors are concerned that mounting debt issues across the Euro Zone will erode investor confidence in the Euro and slow down the rebound in the global economy. Many traders were surprised by this morning’s move which caught traders off guard as they awaited the release of the important U.S. jobs data report.
The GBP USD is also under pressure because of the drop in risk appetite. The charts indicate that a test of 1.4499 to 1.4435 is likely over the near-term.
Plunging equity markets are triggering a possible reversal top in the USD JPY. Traders are dumping risky assets following the plunge in the Euro and the weaker than expected U.S. jobs data report. The Dollar/Yen is trading back under a .618 retracement level at 92.41 which makes 91.61 a new downside target.
Falling demand for higher risk assets is helping to drive the USD CAD higher. The main trend is down, but upside momentum is building which could trigger a reversal of this trend on a breakout over the last swing top at 1.0573. Read the rest of this entry »
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