Another day, another Aussie GDP downgrade.
From BofA Merrill Lynch: Read more
Dear everyone, this article is based on a questionable premise: that the dollar is about to head off on another bull run. We know this may not happen. Thanks, us. Read more
There’s basically nothing happening. Sure we’ve got plenty of rhetoric, a Swiss franc floor and QE — but FX volatility is touching recent lows:
This is just a lovely chart from the FX team at HSBC (click in to see — tis just too big for an excerpt to handle):
What it, and its fellow soon to be introduced below, do is call further into question the US dollar’s status as a haven currency; one which will benefit in periods of risk aversion. They do so by looking at the performance of G10 currencies against the S&P500. It’s a timely query considering the approaching fiscal cliff… and, well, lots of other stuff. Read more
The glacial pace of FX reserve change continues, as documented by the IMF ’s “Composition of Official Foreign Exchange Reserves” data which was released on Friday.
Summary: the dollar is still reluctantly loved, the euro is ‘confused’ by the Swiss and everyone is as deep into the ‘others’ as they can be… which isn’t far. Read more
The pace of reserve accumulation may have been slowing over the past few years — although that also reflects movements in the value of currencies within the portfolios, particularly the dollar — but there are good reasons to suggest it may be picking up again:
With apologies to Russell: a stronger euro may well sit within the set of things that weaken the euro.
Or, to put it even more circularly, if the single currency gets stronger, then the eurozone’s economic recovery gets harder — and thus the measures that are taken, ostensibly, to shore the euro up run the risk of doing it damage by undermining its longer-term existence. Read more
QE3 has set the dogs of FX verbal intervention loose (well, looser anyway) and it seems probable some actual shots may be fired in the coming while.
Bank of New York Mellon’s alliterative Neil Mellor pointed to Brazil, where the central bank was the first to pass comment on the Fed’s move (with our emphasis): Read more
It can’t be much fun being an Australian in London at the moment. (Trailing the Brits is one thing, but lagging the Kiwis in the medal table must really hurt.)
But at least our antipodean visitors can afford to indulge in a little retail therapy at Westfield Stratford City (the Australian dollar is trading close to a record high against the British pound) or, if they are really embarrassed, hop on the Eurostar to Paris (where the dollar hit a record high against the eurothingy just last week). Read more
ChinaScope reports that China’s total outstanding foreign debt was $751.26bn at the end of March 2012, according to data released Monday by the State Administration of Foreign Exchange (SAFE).
Here’s the trend to date, also courtesy of ChinaScope: Read more
From Rabobank’s weekly dive into FX market positioning courtesy of the CFTC’s latest commitment of traders report:
USD longs have jumped to their highest levels not only for the year but since before our records started in 1999 as safe haven demand builds on the back of the EMU crisis and wider concerns regarding the global growth outlook. Read more
First, in a sign that Chinese woes are definitely rising and that authorities are now sufficiently concerned, we bring you news that China cut rates on Thursday (via Bloomberg):
China cut interest rates for the first time since 2008, stepping up efforts to combat a deepening economic slowdown as Europe’s worsening debt crisis threatens global growth. The one-year deposit rate will drop to 3.25 percent from 3.5 percent effective tomorrow, the People’s Bank of China said on its website today. The one-year lending rate will fall to 6.31 percent from 6.56 percent. Banks can offer a 20 percent discount to the benchmark lending rate, the PBOC said, widening from a previous 10 percent. Read more
Bank of Japan easing policy has sent the yen to lowest level against the dollar since July, with the spread between two-year US Treasuries and Japanese debt widening the most since August, says Bloomberg. The yen has lost 3.7 per cent since the BoJ unveiled a one per cent inflation target on February 14. UBS reckons the BoJ’s shift could see the yen at ¥85 by the end of year, although the yen could return to its 2011 rally if Japan resumes posting a trade surplus in 2012, according to the WSJ. Read more
$/€ races ahead of $/£, $/¥ and $/SFr, but $/AUD has made a strong run from behind…
Actually, the thing that jumps out from Table 4 of the most recent FX trading survey from London’s Foreign Exchange Joint Standing Committee is that none of the columns — April 2011 thru October 2011 — are ranked consecutively. (Click to enlarge) Read more
That’s a facetious title, for sure — but also broadly accurate.
Thomas Stolper and team at G Sachs have adopted a new quantitative two-stage model for mapping their macro views on to the
likely possible course of the $ vs the €. The upshot: Read more
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” appeared to be blocked. Read more
Courtesy of Olivier Jakob at Petromatrix, FT Alphaville presents the price of front-month Brent oil futures expressed in euro terms:
Japan intervened in the currency market for the first time since August to weaken the yen, sending it down as much as 5.1 per cent against the US dollar, amid growing concerns the yen’s strength could spur manufacturers to shift even more production overseas, the FT reports. Jun Azumi, finance minister, confirmed he had ordered intervention on Monday to halt the rise of the yen after it touched Y75.35 to the dollar, a new postwar high, earlier in the day. The action immediately sent the yen down to Y79.50. “As I have said before, I will take bold measures against speculative moves in the market,” Mr Azumi said, adding that the currency market “is not reflecting the fundamentals of the Japanese economy.” The yen has gained 41 per cent against the dollar and 46.9 per cent against the euro since the beginning of 2008. Tokyo is increasingly worried that the persistent rise of the yen will push the country’s manufacturers to shift more production outside Japan, resulting in job losses in a domestic economy that has for years relied on exporters for much of its growth. For more on the story see FT Alphaville. Read more
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:
Risk appetite was building as investors reckoned they could see evidence the European Union was getting to grips with the region’s debt crisis and as fears eased that the US was slipping back into recession, the FT reports. The FTSE All-World stock index was up 1.4 per cent, commodities were firmer, with copper up 4.2 per cent to $3.23 a pound, while currencies were favouring a “risk on” tack, the euro up 0.3 per cent at $1.3389 and the dollar index off 0.3 per cent. Financial stocks and miners, which have been bearing the brunt of the recent sell-off, were seeing buyers, helping push the FTSE Eurofirst 300 higher by 1.6 per cent. Benchmark yields of “haven” sovereigns, such as Bunds and Treasuries, were nudging higher by a couple of basis points, though they remained near historic lows. S&P 500 futures suggested Wall Street would start the day with a gain of just 0.3 per cent, but it could be excused after the vigorous bounce of the past few sessions. Read more