Currency

Markets at risk from new split in global economy

24 Feb 2014

“Decoupling” has turned upside down. Soft Chinese manufacturing, a weaker yuan, rising Indian interest rates and political unrest look ominous for emerging economies. Meanwhile U.S. data reassures and even the euro zone is a bit better. The mix looks bad for asset prices.  

Whole FX business belongs in the dock

18 Feb 2014

Some traders may have committed malpractice in the gigantic foreign exchange market, but the currency business itself has the hallmarks of an economic crime. It is much too big to serve any useful purpose. Its volatility is destabilising. And FX hedges are mostly pointless.

Currency wars pose disinflation risk for losers

17 Feb 2014

The dollar and the euro are rising against many currencies. It means that U.S. and euro zone exports are more expensive, and imports cheaper. They can absorb the trade hit. But with inflation already worryingly low, the downward pressure on prices might be harder to take. 

FX fines could hit European bank profit hard

7 Feb 2014

The UK’s financial regulator says foreign exchange manipulation could be as bad as the Libor scandal. If the fines are as big, that has serious financial implications. Libor settlements now stand at $5.8 bln – on average 15 pct of the affected banks’ forecast 2014 pretax profit.

Fear of currency busts stems from bungled booms

4 Feb 2014

Why are plunging currencies “crises” for developing nations when steep falls in the Aussie dollar or the yen are mere “adjustments”? Emerging markets’ financial fragility is the standard answer. But the phobia has its root in the countries’ failure to tame prices in good times.

Hugo Dixon: Independent Scotland won’t keep the pound

3 Feb 2014

The Scottish government wants to be part of a sterling zone if the people vote for independence, as alternatives to the pound aren’t attractive. But it’s hard to see the rest of the UK agreeing to such a deal – except on terms that would affront Scotland’s amour propre.

Turkey’s crisis is beyond central bank’s control

23 Jan 2014

After refusing to hike rates, the central bank is intervening in forex markets to try to stem the lira’s freefall. But Turkey’s problems require more drastic action. The economy’s structural faults and the ruling party’s erratic behaviour are at the heart of investors’ worries.

Edward Hadas: Bitcoin repeats gold-standard errors

22 Jan 2014

The popularity of the pseudo-currency is a sign of economic amnesia. If bitcoin - with limited supply and without government support - were the only currency, it would suffer from the problems of the old hard-money system. The result would be unnecessary panics and crises.

Edward Hadas: An early obituary for bitcoin

8 Jan 2014

Bitcoin mania is not over yet. But the pseudo-currency’s recent volatility is probably the start of its collapse. A retrospective would teach a lot about speculative fever, financial ignorance and the ease with which entrepreneurial time and energy can be wasted.

Dollar to give other currencies beating many want

30 Dec 2013

Currency market volatility will be pronounced in 2014. As the U.S. Fed cuts its asset purchases, the dollar looks set to climb from its current debased depths. The yen and the euro are keen to be beaten, emerging markets aren’t. The pound’s rise will rival the dollar’s.

Bitcoin mania heads into the end game

18 Dec 2013

The electronic pseudo-currency had a good run. Ideologues, speculators and scammers enjoyed it while it lasted. Now Chinese authorities are determined on a strict clamp down, maybe an outright ban. Common sense prevails. Bitcoin’s price is down 50 pct. It will fall much more.

FX increasingly slave to other markets’ moves

9 Dec 2013

Currencies have been especially tough to call in the past year. When global rates are so uniformly low, moves in the mammoth FX market seem to be a by-product of what’s happening in other, smaller, assets classes. That makes predictions almost impossible.

Deutsche ditch divines commoditized commodities

5 Dec 2013

The German bank is quitting energy and base metals trading. That should free up capital without hurting results. It’s a helpful step that others like Barclays and BNP Paribas may follow. It won’t, however, fully solve the bigger problem of a swoon making profits elusive for all.

Edward Hadas: Bitcoin is a step back not forward

27 Nov 2013

The web currency delights right-wing, anti-government economists. But private-sector money is a fantasy. Currencies need political authority; money matters are naturally the state’s responsibility. Bitcoin’s appeal has a lot to do with governments being bad monetary managers.

Bitcoin attention may flip its investor base

20 Nov 2013

U.S. congressional hearings confer a certain sort of legitimacy on the shadowy but high-flying virtual currency. Ardent inflationista and libertarian bitcoin backers won’t much like the arrival of rules and regulations. They could, however, inadvertently attract the masses.

FX market needs clarity in its rules and economics

7 Nov 2013

Possible manipulation of foreign exchange rates is being investigated. It might seem odd in a $5 trillion-a-day liquid market, but trading could conceivably cross the line from legitimate risk management to market abuse. Binding rules are vital. And clients may need to pay fees.

FX probe shows risks of benchmarks

30 Oct 2013

Watchdogs delving into foreign-exchange trading may find nothing, but like Libor, FX is open to abuse. Traders can profit from pushing benchmarks away from the real market price. They supposedly offer certainty and lower costs, but they need tough regulation.

Weak dollar stress-tests the ECB’s toolkit

25 Oct 2013

The euro has gained 8 percent versus the U.S. currency since early July. The ECB’s official line is that the exchange rate isn’t a target. But the tightening of financing conditions in the euro zone is a source of concern – and the ECB has limited tools to address the situation.

Foreign exchange offers few trends to befriend

16 Oct 2013

Currency markets have grown in size but the usual strategies for making money in them aren’t working so well. A dearth of clear and persistent trends, low interest rates in developed countries, and declining volatility are to blame. The tough times aren’t yet over for FX funds.

Chinese euro leanings both financial and strategic

14 Oct 2013

State-owned companies from the mainland are borrowing in euros after a long Chinese absence from the market. It makes sense: interest rates are reflecting the diverging U.S. and euro zone monetary policies. It also advances Beijing’s ultimate goal of becoming less dollar-centric.