China FX swap may blur Bank of England mandate 28 Jan 2013 The central bank is under pressure to set up a swap facility with its Chinese counterpart. Doing so would boost renminbi trading in London. But the BoE’s main concern should be financial stability, not the City’s competitiveness. Confusing the two would be a mistake.
Europhobic pound faces year of two halves 23 Jan 2013 The pound is sliding. An EU membership referendum is a definite new negative. Trade and public finance data feed the doubts. A poor GDP figure and snow may compound the weakness. But the UK is still expected to outpace the euro zone this year. Decline may turn into opportunity.
Global currency war would lack euro fighter 22 Jan 2013 Jens Weidmann is afraid that major central banks are bowing to their governments’ pressures to push down currencies. The Bundesbank head wants Europe to stay above the fray. For once, he and Mario Draghi agree. Japan’s new policies won’t tempt the ECB to take up arms.
Japan comes dangerously late to currency war 7 Jan 2013 Trash-talk from the world’s third-largest economy has pushed the yen down some 12 percent since September. But Japan is a Johnny-come-lately to the global contest to weaken currencies to support growth. Opening another front at this point only makes the contest more dangerous.
Egypt’s Brotherhood meets financial reality 7 Jan 2013 The fall of the pound creates inflationary pressure and capital controls underscore the shrinking of foreign reserves. Egypt’s ruling Brotherhood must finalise an unpopular deal with the IMF or risk a currency meltdown. Neither option is appealing ahead of elections.
Iran at risk of draconian response to rial slide 3 Oct 2012 Tehran’s attempt to ease pressure on the currency helped trigger this week’s sudden and sharp slide. Iran has limited short-term options to stem the panic. A deeper rebalancing of the economy is required. But in tough times that might just result in a more bullying state.
World without dollar primacy a blast from the past 26 Sep 2012 Goldman boss Lloyd Blankfein reckons the dollar’s reserve status may be at risk. Having no dominant currency would hark back to the 18th century, when silver pieces of eight competed with many other coins. Specialist currencies might emerge, but trading costs could rise.
Egypt’s posturing pound pledge may return to bite 28 Aug 2012 Mohamed Mursi has ruled out a devaluation days after a senior advisor acknowledged its necessity. But Egypt would need a swift recovery in tourism and foreign investment, the end of insecurity and a deal with the IMF, for its president not to eat his words.
US derivatives leader makes timely push on Europe 20 Aug 2012 CME plans a London derivatives exchange. By starting in currencies it avoids tackling rivals NYSE and Deutsche Boerse head-on. The timing is also canny. Private trading is migrating to bourses and moving earlier might have made it easier for NYSE-DB’s merger to win approval.
Ethical economy: The touchstones of Yap 11 Jul 2012 The Pacific island of Yap used two-tonne stones as currency. The odd system worked because people believed in it. The modern monetary system is also faith-based, and that faith has been shaken by the financial crisis. Purification is needed to strengthen the value of money.
Scots aim to break Europe’s working currency union 9 Jul 2012 Europe does have a successful currency, fiscal and banking union - in the United Kingdom. Scottish nationalists want to go backwards, towards the weaknesses of the euro zone. In Edinburgh as in Brussels, it’s dangerous to let politics get the better of financial reality.
Anti-euro prize strengthens case for euro 5 Jul 2012 The offer of 250,000 pounds for the best way to untangle the single currency was supposed to make a breakup more plausible. The winning Wolfson Prize entry shows how it might be done. But the proposal is so messy that it supports the opposite case: a breakup shouldn’t happen.
Hong Kong, enjoy your peg while it lasts 27 Jun 2012 Hitching the Hong Kong Dollar to the U.S. greenback brought 30 years of something like stability. Now it brings inflation and high property prices. Yet the alternatives are messy, and the peg has a symbolic value. The status quo is best, until China offers a good replacement.
India’s finance minister goes out with a flop 25 Jun 2012 Talk about over promising and under-delivering. Pranab Mukherjee inflated the market’s hopes that he’d take bold measures to boost investor confidence, but came up with a few small tweaks - on his last day as finance minister. Hopefully his successor will talk less and act more.
Denmark is another costly refuge 21 Jun 2012 In search of a safe haven? Denmark ticks the boxes. The economy is strong and the krone isn’t the euro, but shadows it. Tempted investors should think hard. The central bank is against them and two-year yields are negative. Investors only win if Germany exits the euro.
Eurogeddon would drive Swiss to capital controls 13 Jun 2012 The Swiss decision to peg the franc is working. GDP is increasing and deflation persists despite the central bank’s liberal money-printing. The SNB will go further, to emergency capital controls, if the euro crisis worsens. The worry is there’s no end to currency poker in sight.
Perhaps the Swiss should just join the euro? 28 May 2012 The Swiss National Bank is engaged in an expensive battle against savers who want to flee the euro for Swiss franc safety. Instead of fighting, perhaps the country should join the single currency. Exports would do well, German-style. But there might be nasty consequences.
"Geuro" could be least bad Greek solution 21 May 2012 Greece would run out of euros if it reneged on its bailout. But it could keep the euro as the official currency and issue IOUs that became alternative tender, or “geuros”, argues Deutsche Bank. Such dual currency regimes are unstable. But the geuro might just help Greece recover.
The rupee looks vulnerable 30 Apr 2012 India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. The rupee’s 19 percent fall against the dollar over the past year is worrying. Predictions of further decline could become self-fulfilling.
Japan’s yen yearning takes dismal corporate turn 24 Feb 2012 Toshiba and Sony are tapping $2.4 billion in loans from a government fund designed to promote M&A abroad and weaken the yen. But companies are spending the money on the kind of foreign forays Japanese firms use to avoid reform at home. Japan can’t afford such misadventures.