From a tame taper to a rate rage? And on its birthday too.
As Alan Beattie says, it was a year ago this week that the “taper tantrum” shook emerging markets, after comments from Ben Bernanke raised fears of the Fed tightening monetary policy. That sucked for EMs even if the reaction to the actual taper, which began in December, was much more chilled.
But it’s what happens when rates eventually rise that’s perhaps more interesting now. From Lombard Street’s Dario Perkins (our emphasis): Read more
Give unto Caesar what is Caesar’s
Following on from our previous post, there are a number of reasons why banks choose to voluntarily fund and capitalise themselves when — thanks to the power of their own seigniorage — they don’t have to. Read more
The Japanese government has confirmed that it intervened unannounced into foreign-exchange markets to weaken the yen last year, for the first time since 2004, the FT reports. Ministry of Finance data released on Tuesday showed Japan carried out Y1.02tn ($13.3bn) worth of unannounced intervention during the first four days of November, after selling a record Y8.07tn on October 31st, when the yen climbed to a post-war high of 75.35 against the dollar. This so-called “stealth intervention” had been widely anticipated, given discrepancies between the rise in yen balances implied by Bank of Japan reserve balance data, and the Y9.09tn of yen-selling MoF had earlier disclosed for the period between October 28th and November 28th. Even so, the more detailed breakdown may increase pressure on Japan from the US. A December report from the US Treasury Department sharply criticised the G7 nation for its recent unilateral interventions to curb yen appreciation. The BoJ has sold the currency four times since late 2010, under orders from MoF.
Right, here’s some early reaction to the latest central bank liquidity drop.
It comes from RBC’s Michael Cloherty, who makes the astute observation that it is now cheaper for foreign banks to borrow dollars from their central bank than it is for a US bank to borrow from the Federal Reserve: Read more
Corporate governance at the Bank of England is coming under increasing scrutiny from senior bankers and politicians concerned that its court of non-executive directors is not robust enough to hold its executives to account for the central bank’s greatly expanded functions, reports the FT. They warn that the court – which in earlier years was more like a sounding board rather than a corporate board – may not have the expertise, experience or authority to challenge senior Bank officials as they extend their responsibilities beyond monetary policy into broader financial regulation.
It’s also central bank run, of sorts.
Belarus news specialist The Telegraf reports that the nation’s central bank has stopped exchanging gold for Belarusian rubles. That’s after the National Bank of Belarus said the volume of gold and foreign exchange reserves dropped by $68m to $5,512m last month ahead of a widely-expected devaluation. Read more
Keeping up with currency wars can be a busy business.
It’s time, therefore, to give our already extensive intervention list, originally compiled on September 28, an update. And check out the emerging market entrants. Read more
Central banks are no strangers to criticism, but we wonder if the Bank of England was remotely prepared for the smackdown it was just given by FT economics editor Chris Giles:
The forecasts used by the Bank of England to set interest rates are biased and contain little useful information, a Financial Times audit has demonstrated. Read more