Posts tagged 'FX'

With great power etc

This does smack of desperation, doesn’t it? From the FT on Thursday morning:

Osborne will use his Budget on March 20 to reinforce his message of “fiscal conservatism and monetary activism” by clarifying how the government intends to use monetary policy to get the economy growing again.

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Don’t kill the old, pander to them

“Whatever we can”, you say? Encouraging words from BoJ governor nominee Kuroda over the weekend (even if comparisons with Mr Draghi are overblown). If Cullen Roche is correct, what happens in Japan over the next year or many could change the future of economic policy. So it’s worth spending a bit more time on what Kuroda’s “can” might actually be.

We’ve argued already that much of the low-hanging fruit of expectations and verbal intervention has already been plucked. Read more

Currency moves contextualised

That’s the euro down 0.4 per cent or so against the dollar and crossing the $1.30 mark. Sterling (aka the Great British Krona) is also continuing its torrid start to 2013, losing another 0.9 per cent against the dollar and touching $1.50. Read more

Shinzo Abe’s phaser

Gotta love a good contrarian yen call.

As we’ve written multiple times, the yen’s recent fall been based on policy which has yet to appear, namely on expectations of Abenomics. Japanese authorities have done an excellent job of short-term monetary fear-mongering, but as Gavyn Davies put it recently there is a severe risk that the international hedge funds which have been driving the decline in the yen might come to the conclusion that the emperor has no clothes. Read more

Ye olde Abenomics

All this has happened before and will happen again… at least, so hopes the Japanese government.

Current finance minister Taro Aso has been keen to channel the spirit of his 1930s equivalent Korekiyo Takahashi, whose polices are widely credited with pulling Japan out of the Showa Depression. It’s understandable. Read more

A dollar bully

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

A blinking red light

That’s Citi’s risk-warning signals beginning to spike over the past couple of weeks and especially over the last day or two. From Citi’s Steven Englander: Read more

A Minutes worth of sterling freefall [updated]

Here’s the dovish BoE minutes that started sterling sliding (click through for the pdf): Read more

Japanese investors, the AUD and everyone else

Japanese investors are a powerful bunch in world markets. For a microcosm of this, just look at Australia; Japan plays a big role here in debt and in turn, in currency; and it’s a market that has been very attractive to foreigners of late, keeping the currency stubbornly high regardless of price changes in the country’s key exported commodities. BUT, as with everything yen at the moment, there is a serious shift going on. Read more

Currency handbags at dawn [updated]

The currency war meme rumbles on as the G7 does its very best to avoid a coherent message amid arguments about whether drawing a distinction between “domestic objectives” that weaken a currency and just plain weakening it actually matters. Ho hum. Read more

The Draghi Rorschach test

“Oh, Hollande…” said Mario Draghi as the rest of us wondered if he had or hadn’t entered the supposed currency wars. Or if, in fact, the question was redundant.

The euro’s dive on Thursday was impressive and clearly the result of ECB president Draghi’s comments after the ECB’s rate setting meeting. But whether it was justified or not is very much contested. Read more

All’s fair in love and currency wars

Japan’s Masaaki Shirakawa gave notice on Tuesday that he would be leaving his post as governor of the Japanese central bank on March 19, three weeks earlier than slated.

Can we blame Shirakawa? His departure now coincides with that of two deputy BoJ governors who would be replaced by Abe-nominations (we resisted the urge to go for ‘Abominations’; it wasn’t easy.).

If Shirakawa had stuck around he presumably would have found himself the head of an increasingly mutinous court. Read more

Bye, bye RoRo

For US dollar pairs at least…

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Banker demonstrates willingness to wear tights to acquire paperweight of glory

Yes, dear readers, it is awards season. The time of year when the content of the most ignored slides in pitchbooks is decided upon. Even disclaimers may be read more, if only to discover if the poor, hapless, underslept and under-exercised analyst who wrote it remembered to do a find-and-replace for the previous client to whom the book was presented.

It has come to our attention that in this latest round, a couple of banks are taking notably different approaches to the Euromoney FX survey. And of course, we couldn’t resist taking a look at the methodology of the thing. Read more

This normalising world

From the Danish central bank:

Effective from 25 January 2013, Danmarks Nationalbank’s interest rate on certificates of deposit and the lending rate are increased by 0.10 percentage point. The discount rate and the current account rate are unchanged. Read more

The practicalities of the currency wars

We have Weidmann worrying the currency wars are kicking off again with Japan leading the way and a whole host of others either joining in and/ or complaining hypocritically. Read more

Reserve managers turn sultry eyes towards China

China snuck something out last Friday that just might be pretty significant…

From the FTRead more

The second coming of Abe… confirmed

The landslide win for the Shinzo Abe-led Liberal Democratic party in Japan at the weekend pushed the Japanese yen to its weakest level against the dollar since April 2011 (inverted chart, don’t ya know):

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It’d be Aud if it wasn’t so simple

The Australian Financial Review is reporting that some central bankers are encouraging the Reserve Bank of Australia to consider heavy intervention rather than cut rates, if it wants to bring down the value of the Australian dollar, which is at its highest in months. Read more

‘Negative’ has such unfairly negative connotations

Dear people,

ATTENTION:

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Draghi’s ready to get negative

Obvious dovishness + Draghi’s admittance that the ECB is operationally ready for negative deposit rates = that. Read more

Credit Suisse finds positives in negative (rates) [updated]

Are you a Swiss bank? Do you have haven appeal? Want to make some quick, easy money? Then keep reading…

Credit Suisse has decided it will start charging negative rates on Swiss franc cash balances above a certain threshold. From CS: Read more

A sterling inflow

So, would a sovereign downgrade hurt sterling? And if so, how much? It’s hard to model this as historic comparisons are muddy and sterling crosses each obviously carry their own difficulties. Consider this chart from Morgan Stanley, by way of illustration:

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Yenning for a counter argument

THE YEN IS DOOMED, don’t ya know? And, to be fair, the longer term arguments are hard to fight against but the risk of a near to medium-term yen bounce is significant. Read more

FX excitement! Nah, you may as well head home for Christmas

Oh dear, many an FX trader is gonna be disappointed by this one — history suggests FX volatility is heading down, not up, as we exit November.

From Deutsche Bank’s Alan Ruskin… Read more

FT Alphaville also available for your ears, FX edition

As a special treat, the below podcast.

FT Alphaville reporter David Keohane met Simon Derrick, chief currency strategist at BNY Mellon. They geeked out on various FX topics. Read more

An actual consequence of France’s downgrade?

Not many people seem bothered by France’s overnight downgrade by Moody’s. The euro shrugged and French bond yields crept upwards at a snail’s pace.

But one place the downgrade might have a real and lasting impact is within the Swiss National Bank. They have a predilection for core eurozone bonds and the downgrade might just prompt them to ditch what holdings they have and/or stop loading up on French debt.
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Woot! RoRo is fading.

This is from RBC’s Adam Cole who has been trying to get WOOT (World of One Trade) into the FX psyche for a while. So, l33t research indeed, but RoRo was always gonna be a tough meme to contend with.

Anyway… Cole’s point is that that there are more currency pairs uncorrelated to equities right now than at any time for five years. In fact, he says, correlations have started to break down to the extent that a majority of G10 currency pairs were uncorrelated with equity returns over the last three months. Another false dawn or an actual end to the dominant RoRo paradigm? Read more

Hey, Japanese government – leave the BoJ alone (says Koo)

The Bank of Japan’s unprecedented joint statement with the Japanese government after the central bank’s October meeting raised eyebrows around the world. The BoJ was already widely seen as having come under increased political pressure in recent months as the country’s economy had slowed; so what did the joint statement mean?

The statement contained a couple of key declarations: “The Bank strongly expects the Government to vigorously promote measures for strengthening Japan’s growth potential”, and “The Government strongly expects the Bank to continue powerful easing as outlined in section 2 until deflation is overcome.” Read more

Of anniversaries and odd couples in Japan

Well, we’re cheating a bit here as the anniversary was two days ago, but it still allows for a discussion of the “government versus the central bank” thing going on in Japan and gaining traction everywhere else. It’s been just over a year since Japan’s Ministry of Finance last threw a whole heap of yen at the US dollar — the selling started on October 31 and ended on November 4Read more