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’A fistful of ______
Iranian FX management — still as bonkers as ever:
TEHRAN, Jan 10 (Reuters) – Iran’s currency has slid 20 percent against the dollar in the last week despite central bank intervention, and Iranians concerned about the economy said on Tuesday attempts to send text messages using the word “dollar”
Hungary for junk?
Gosh, Hungary divides sentiment. (It has also, just as we went to pixels, been stripped of its last investment-grade rating by Fitch.)
Despite our saying not once but twice that Hungary isn’t running out of money in its current crisis,
FX trader du jour [updated]
Hildebrand’s wife, Kashya Hildebrand, said in a written statement published on Swiss television late yesterday that her “interest in the dollar purchase was motivated by the fact that it was at a record low and almost ridiculously cheap.”
Via Bloomberg.
Post-euro economies, charted
Crystal-ball charts via Mark Cliffe of ING (click to enlarge):
We lay emphasis on “crystal ball” given the long time-frame ING has employed, and the intense difficulty in quantifying the damage which complete break-up would cause to cross-border trade and so on.
Me like cheap dollars
A much bigger turn-out than usual from banks for the ECB’s latest operations to swap their euros for dollars:
RTRS-ECB ALLOWS 50.685 BLN DOLLARS IN 84-DAY OPERATION VS RTRS POLL $10 BILLION
RTRS-ECB
UBS doubts your eurozone contingency plan is good enough
The latest eurozone missive from UBS’ global economics team is out, and they sound worried that their earlier reports were not adequately scary taken seriously enough.
Yes, the euro is deeply flawed,
Post-euro currencies, charted
Click Nomura chart to enlarge:
Along with “redenomination risk” for eurozone financial assets, this is another of those pieces of bank research that’s as interesting for being considered necessary to be written in the first place,
Euro *non*-redenomination risk
Amazing what you find in analyst reports on German telecom credit these days (via Societe Generale’s Juliano H Torii):
…we think investors might be waking up to the possibility of the mirror image of redenomination risk – what we will call “no-redenomination” risk (NORED) – a risk that may be severely underestimated for the German companies in our space.
Guest post: Thinking the unfolding — the break-up of monetary union
Many in the market are now thinking through the consequences of any one country (or all 17 member states) changing currencies on departing the euro. Gilles Thieffry, a Partner at GTLaw, Geneva, has perhaps been thinking it through earlier than most.
Euro whiplash
The Bunga Bunga euro bounce is over. The only way is down, it seems:
Source: Thomson Reuters Eikon
The currency’s litany of woes include its strong correlation with weakening euro stocks, the poor performance of recent PMIs,
Long EM, short G10: FX hedge edition
Tin hats at the ready. If the eurozone trouble deepens, emerging market equities could once again overshoot fair value in a wave of deleveraging.
So it’s time to put a value on them hedges…
Let’s look at FX plays for now.
Inter-yention — it’s back
After the Japanese yen hit a record high of ¥75.311 against the dollar on Monday morning, the BoJ/Japanese government jumped in, selling an unspecified amount of yen which brought its valuation down about 5 per cent against the dollar and 4 per cent against the euro:
Why sterling just got splattered
Impressive move following the Bank of England rebooting QE…
Some immediate reaction from Alan Ruskin of Deutsche Bank:
A few things stand-out immediately on BOE QE decision to do extra 75bn, which was more than the market expected,
If Greece can leave, anyone can leave
Also: think about the governing law of your government bond when a currency union is collapsing. Willem Buiter of Citigroup on Tuesday, exploding a certain meme:
A Greek exit is indeed often viewed as
A Swiss “sigma” event
Or, turning the leveraged into fondue. Hat-tip to Scott Barber of Reuters graphics:
Related link:
European Central Bank response – ECB
The Swiss National Bank is pegging it
“prepared to buy foreign currency in unlimited quantities…”
Carried away in Switzerland [updated]
Negative rates have arrived! In Switzerland, anyway.
Which means the risk of the Swiss franc becoming a funding currency for carry trade — à la the Japanese yen — is very real.
That said, volatility is still the issue.
Basis swaps and beer
One way to visualise the pressure at the short end of the euro basis swaps curve — indicating trouble getting short-term dollar funding for an unknown number of European banks there — is to go 3D.
Such as here.
A dollar bidder at the ECB
OK — caveats first. It’s only one bank and the amount it’s tapped at Wednesday’s ECB dollar swap, $500m, isn’t exactly a systemic sum.
But a taboo has been broken…
Banks appear to have feared the stigma of approaching the ECB for dollar funding so far,
A sterling safe haven
Here’s a safe haven idea you may not have thought of.
The Great British Krona.
Standard Bank’s Steven Barrow points out that sterling has fallen, on a trade-weighted basis, much more than the other major currencies:
The unintended tightening
Not good, not good at all.
From Morgan Stanley’s US rates team on Tuesday:
The funding markets had been stressed previously in April-June 2010 due to risks associated with the sovereign debt crisis in Europe.
Swiss bank avalanche
This might be a deferred sell-off following Monday’s holiday in Switzerland. In the words of one analyst though, they’re ‘stuck between a soft dollar and a hard franc…’
(That’s because the wealth management arms of both banks have mainly US dollar revenues and Swiss franc costs).
Selling Italy, buying UK [updated]
Compare….
Contrast…
That’s a modern record low for the 10-year gilt yield and a record eurozone high for its Italian peer. Outwardly, it’s an amazing gulf in some respects as both sovereigns are doomed to low growth.
Inter-yention stations
It wouldn’t be a proper dollar panic unless there were rumours, uncertainty and fear that the Bank of Japan is intervening in the yen:
So here we are. Rumour, uncertainty, fear:
Gold’s not as stretched as you might think, Citi says
One for the gold bugs, this.
The possibility of a surge in the price of gold is growing, according to the commodities team at Citigroup.
In fact, they say, the probability of a short-lived spike in gold is now above 25 per cent (up from 5 per cent just a few weeks ago) and that’s even without a worst-case economic scenario actually happening.
Inter-bank, minus the bank
That the European Central Bank has stepped in to replace much of the eurosystem liquidity that used to be provided by the banks’ themselves is well-known. Did you know, however, that one measure of the ECB’s liquidity provision is now higher than in the depths of the 2008 financial crisis?
It’s the ECB’s so-called ‘recycling’ of bank deposits,
Shadow currencies lurking behind a new dollar smile
G3 currencies are just so … démodé.
Where once the US dollar, euro and yen indisputably dominated global currency trading, there are now alternatives. The S3 currencies. So says UBS strategist Syed Mansoor Mohi-uddin in a short note.
Nordea hunts down a Norwegian interest rate typo
Price action in the Norwegian krone on Tuesday:
Last week Norway’s central bank said it was holding interest rates at 2.25 per cent, but indicated through various data sheets and background material that an interest rate rise could come in either August or September.
$8,000bn speaks reserve currencies
The dollar is down, the euro is out, and SDRs are in. Results from UBS’s reserve management survey, canvassing institutions with a collective $8,000bn of assets:
