Currency

U.S. does what it can to de-reserve the dollar

1 Oct 2013

A global currency hegemon intent on shedding its status might try fiscal panics and selfishly erratic monetary policy. The world is still far too reliant on the dollar to care much. But while international clout is never lost overnight, the U.S. is speeding up the end of its era.

Corporate group-think will lead to shared FX pain

23 Sep 2013

Currency swings will make Adidas miss its targets. The German sportswear maker won’t be alone - most European companies are fashion-followers in not fully hedging foreign exchange. There are good reasons for not standing out from the crowd - but that sometimes brings group-pain.

Raghuram Rajan wants to be India’s Paul Volcker

20 Sep 2013

Like the 1980s Fed chairman, India’s new central bank head wants to wring entrenched inflation out of a moribund economy. A surprise rate increase won’t win Rajan many friends. But he has sensibly retreated from his predecessor’s foolish plan to shore up the falling rupee.

UK needs to live with a rising pound

11 Sep 2013

Sterling is on the march, reflecting better UK growth, lower unemployment and a lack of quantitative easing from new Bank of England head Mark Carney. The worry is that this comes before the UK economy has rebalanced towards exports. But it’s hard to see what policymakers can do.

Euro’s shrinking FX market share is a puzzle

5 Sep 2013

It’s no surprise that daily currency turnover has hit a record high again, now topping $5 trillion. But it’s harder to explain why the euro’s share of the market has touched a record low. The reasons will matter to banks allocating resources within their FX businesses.

Rajan’s call to diaspora can’t stem rupee rout

5 Sep 2013

India’s new monetary czar can lure some funds from overseas Indians with a cheap dollar-rupee swap. The clever and relatively cheap ploy may buy some time, but the former IMF chief economist will only succeed as a central banker if he can break the country’s painful stagflation.

Emerging market currency rescue is a pipe dream

2 Sep 2013

India’s idea of group-selling dollars to prop up emerging market exchange rates would be a tough sell. Participants would be asked to spend their reserves to help others, and probably lose money in the process. The best thing India can do is to revive sputtering growth.

The euro’s serene summer may come to an abrupt end

29 Aug 2013

Europe’s single currency has risen against the dollar in the last two months, avoiding the gyrations which have plagued global bond and equity markets. But the mood is souring. Investors are flocking to the options market to bet the euro will fall. The odds are it will.

Sterling flirts with safe-haven status

12 Aug 2013

The pound has a lot against it, including dovish central bank rhetoric, but Britain is returning to growth as the euro zone struggles. And while the U.S. may soon taper QE, the UK has already parked the policy. The cheap British currency looks like a good bet.   

Safe havens face three-pronged assault

3 Jul 2013

Markets have corrected but safe havens are still vulnerable. U.S. dollar strength is bad for gold, bonds, and the Aussie dollar. A euro zone out of acute crisis is bad for the Swiss franc. And even a tepid economic recovery will attract funds out of safe havens into stocks.

Bitcoin ETF signals time to make market in cash

2 Jul 2013

A virtual currency fund IPO means there will now be an index tracker for almost everything. Except that financial engineers have ignored the most important asset class of all. No more. Say hello to the Breakingviews Dollar Trust. It makes holding cash as easy as trading a stock.

Markets suffer too much central bank attention

12 Jun 2013

It’s Goodhart’s law: indicators start misbehaving as soon as they are seen to be telling gospel truths. The monetary authorities think strong asset markets and weak currencies will help growth, but their financially orientated policies are now more confusing than helpful.

Inflation arises from popping EM asset bubbles

5 Jun 2013

Mere talk about Fed tapering has been enough to reverse the previous flood of foreign money into emerging market bonds and stocks. As these bubbly assets deflate, currencies are falling in Turkey, Brazil and Mexico. That will push up inflation and cut into growth.

New groat plan could suit an independent Scotland

23 Apr 2013

The UK exaggerates the difficulties of operating a “sterling zone”. But an independent Scottish currency - call it the groat - is workable. Though there are risks, a new money order would bring advantages for self-determination, macro policy, growth and employment.

IMF crowd should cut Japan some slack

19 Apr 2013

Prime Minister Shinzo Abe’s economic policies are in for a drubbing at the fund’s spring meeting. IMF officials bemoan Japan’s “risky” fiscal stimulus while America grumbles about the yen. But Japan, which is one of the IMF’s staunchest supporters, was right to act.

Colombia sets good stimulus example for Latam

16 Apr 2013

The Andean nation is trying to goose its slowing economy by spurring private pension funds to invest more abroad and inducing public ones to buy $5 bln in foreign exchange locally. It’s a welcome contrast to protectionist measures used nearby. Colombia is winning the currency wars.

Currency wars worsen risk of trade insurgencies

11 Apr 2013

Last year’s weak trade growth won’t get much better in 2013, the WTO reckons. Boss Pascal Lamy worries about rising protectionism. With Japan the latest big economy to deploy monetary policy to weaken its currency, the temptation to respond with trade barriers can only increase.

Bitcoins need more than fear and love to thrive

25 Mar 2013

The value of the digital currency beloved by inflationistas and libertarians has shot up more than 60 pct in a week thanks to the Cyprus-infused panic over deposit insurance. But it currently has too many drawbacks: utility, not emotion, will determine whether Bitcoins catch on.

Weak pound need not turn into sterling crisis

4 Mar 2013

The soft pound suits UK policymakers. Along with low gilt yields, it helps stimulate the economy. But if it falls too far and too fast, gilt yields would rise and decline could turn to rout. Further quantitative easing is risky, overt monetary financing would be disastrous.

Moody’s shaming brings UK gain in currency war

25 Feb 2013

The loss of triple-A is humiliating, but that’s now history. The lingering effect of Moody’s action is a weaker pound, and that should serve to stimulate exports, GDP growth and inflation. If so, there’s less risk of unlimited BoE money printing when Mark Carney takes charge.