Review: The virtual bubble of bitcoin 15 May 2015 The digital currency fits well in the inglorious history of finance. Nathaniel Popper tells the story in “Digital Gold”. Bitcoin’s hot idea, limited supply and uncertain value helped spawn a price explosion. After the bust, the underlying technology may still have a future.
DoJ stabbing of UBS would send wrong message 13 May 2015 U.S. enforcers may use the Swiss lender’s forex sins to undo an agreement not to prosecute it for rate-rigging, reports say. That may be technically possible. But UBS won leniency for fessing up. A DoJ about-turn risks making banks feel they’ll be better off refusing to help.
New trading dynamics encourage big FX lurches 11 May 2015 Trading scandals and losses from the Swiss franc’s dramatic January rise have made currency traders more cautious. The result is a market where fewer dealers will challenge trends. It’s like a train with faulty brakes. A little momentum can take exchange rates on a long journey.
Rob Cox: Bitcoin enters age of Goldman and lawyers 30 Apr 2015 For libertarian early adopters, the discovery of the cryptocurrency by Wall Street’s top firm and a bevy of legal eagles is a pivotal moment. Diehards will mourn the lost privacy and edginess of bitcoin. The flipside is the prospect of mainstream financial industry acceptance.
Euro zone needs to reinforce its founding myth 21 Apr 2015 The single currency is supposed to be irreversible. Yet European policymakers regularly conjure up the risks of Greece’s euro exit. No wonder potential Greek IOUs elicit vastly divergent reactions to actual Californian ones. This difference suggests how the euro zone can change.
Forex reform is an uphill struggle 24 Mar 2015 Global supervisors are nobly trying to improve a market which has too often pitted traders against clients. Increased transparency and stricter discipline can help make the culture more professional, but it will be hard to stamp out profitable and entrenched bad behaviour.
Swiss caught in the wake of massive FX currents 19 Mar 2015 Exposure to the European economy has helped Switzerland. The euro has not. The failure of the franc’s peg to the single currency has cut into expected growth, and leaves the central bank searching for a new approach. The lesson: in currency wars, the little guys usually lose.
Dollar strength is biggest risk to strong dollar 12 Mar 2015 The greenback’s momentum towards parity against the euro is powerful. But the self-reinforcing rally rests on confidence in a Fed rate rise by autumn. If exporters’ pain from rapid dollar gains gives rate-setters second thoughts, it could stall. So far, there’s no sign of that.
FX traders will find cheap funding hard to exploit 20 Feb 2015 Carry trades should be child’s play when so many policy rates are near or even below zero. But borrowing in low-yielding currencies and buying ones with higher returns is far from easy in current market conditions. Volatility and a murky FX outlook pose the biggest dangers.
Nigeria’s currency still looks vulnerable 20 Feb 2015 The central bank wants to stabilise the naira against the dollar, after a 22 pct drop since September. But Africa’s biggest economy is beset by political strife, corruption, poor infrastructure and plunging oil exports. The former star “frontier market” is in a tight spot.
Much trading is probably best left to the experts 18 Feb 2015 After its Swiss franc thwacking, FXCM is abandoning some currencies. If BATS takes another stab at an IPO, it may turn to the Nasdaq or NYSE. And Goldman is one of only a few banks powering ahead in fixed income. Competition is necessary but so is clear focus in risky businesses.
Danish FX battle carries collateral damage risks 12 Feb 2015 Denmark’s latest tactic to curb its currency’s strength against the euro is a refusal to sell treasury bills. The central bank says lower market liquidity would be just a “cost of war.” Pension funds and banks might well find that it is the least of their worries.
Others will join hryvnia and rouble in FX sin bin 6 Feb 2015 Ukraine’s currency plunged 30 pct in a day. Russia’s is down by half since July. Both are stuck in vicious circles, where local inflation and devaluation reinforce each other. In a disinflationary world where capital is flighty, others could easily fall into the same spiral.
Bitcoin is latest victim of disinflation 16 Jan 2015 The would-be currency is down 33 pct this year. Bitcoin is a collectible like a painting so psychology matters, and that’s against it in the current climate. Free transactions could end too. The tech may have value, but bitcoin will struggle to regain lost confidence.
Swiss give scary lesson on central banks’ limits 15 Jan 2015 The monetary authorities are expected to control inflation, deflation, growth and the financial system. But the Swiss National Bank, an above-average institution, has managed to mess up badly by breaking its word. Others may not do much better.
Swiss recalibrate currency world by dropping peg 15 Jan 2015 The Swiss National Bank could print enough francs to keep the currency stable against the euro but not against the dollar. So it dropped the euro peg in favour of more negative rates and a vague commitment to intervene. The franc rocketed. But it is a less predictable safe haven.
Bitcoin’s defects will hasten its demise in 2015 26 Dec 2014 The leading crypto-currency’s economies of scale in mining and its transaction system’s vulnerability to subversion by a dominant miner make it unsound. As seignorage declines it will become cost-uncompetitive for transactions. Flaws may cause its price to lose further altitude.
Betting against Swiss currency cap is high stakes 27 Nov 2014 Traders are testing the central bank’s franc ceiling and using options to bet the currency will break through. The wager is inspired by euro weakness and a looming referendum on whether the SNB should buy more gold. This is one monetary authority the market is unwise to take on.
Russian central bank intervention is a dead end 8 Oct 2014 The central bank of Russia is buying roubles on the market, but the exchange rate keeps sinking. The economy has deep structural flaws, worsened by Putin’s aggressive foreign policy. There are many reasons to take capital out of Russia. For the currency, the only way is down.
Cross-border bank whippings won’t dent dollar, yet 8 Jul 2014 It’ll take a lot more than multibillion-dollar fines from U.S. regulators to wean global trade from its greenback dependency. Politicians like France’s finance minister may moan but firms won’t ditch the buck as long as it’s more convenient to keep using it – up to a point.