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.
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.