Currency

Dollar strength is biggest risk to strong dollar

12 Mar 2015

The greenback’s momentum towards parity against the euro is powerful. But the self-reinforcing rally rests on confidence in a Fed rate rise by autumn. If exporters’ pain from rapid dollar gains gives rate-setters second thoughts, it could stall. So far, there’s no sign of that.

FX traders will find cheap funding hard to exploit

20 Feb 2015

Carry trades should be child’s play when so many policy rates are near or even below zero. But borrowing in low-yielding currencies and buying ones with higher returns is far from easy in current market conditions. Volatility and a murky FX outlook pose the biggest dangers. 

Nigeria’s currency still looks vulnerable

20 Feb 2015

The central bank wants to stabilise the naira against the dollar, after a 22 pct drop since September. But Africa’s biggest economy is beset by political strife, corruption, poor infrastructure and plunging oil exports. The former star “frontier market” is in a tight spot.

Much trading is probably best left to the experts

18 Feb 2015

After its Swiss franc thwacking, FXCM is abandoning some currencies. If BATS takes another stab at an IPO, it may turn to the Nasdaq or NYSE. And Goldman is one of only a few banks powering ahead in fixed income. Competition is necessary but so is clear focus in risky businesses.

Danish FX battle carries collateral damage risks

12 Feb 2015

Denmark’s latest tactic to curb its currency’s strength against the euro is a refusal to sell treasury bills. The central bank says lower market liquidity would be just a “cost of war.” Pension funds and banks might well find that it is the least of their worries.

Others will join hryvnia and rouble in FX sin bin

6 Feb 2015

Ukraine’s currency plunged 30 pct in a day. Russia’s is down by half since July. Both are stuck in vicious circles, where local inflation and devaluation reinforce each other. In a disinflationary world where capital is flighty, others could easily fall into the same spiral.

Bitcoin is latest victim of disinflation

16 Jan 2015

The would-be currency is down 33 pct this year. Bitcoin is a collectible like a painting so psychology matters, and that’s against it in the current climate. Free transactions could end too. The tech may have value, but bitcoin will struggle to regain lost confidence.

Swiss give scary lesson on central banks’ limits

15 Jan 2015

The monetary authorities are expected to control inflation, deflation, growth and the financial system. But the Swiss National Bank, an above-average institution, has managed to mess up badly by breaking its word. Others may not do much better.

Swiss recalibrate currency world by dropping peg

15 Jan 2015

The Swiss National Bank could print enough francs to keep the currency stable against the euro but not against the dollar. So it dropped the euro peg in favour of more negative rates and a vague commitment to intervene. The franc rocketed. But it is a less predictable safe haven.

Bitcoin’s defects will hasten its demise in 2015

26 Dec 2014

The leading crypto-currency’s economies of scale in mining and its transaction system’s vulnerability to subversion by a dominant miner make it unsound. As seignorage declines it will become cost-uncompetitive for transactions. Flaws may cause its price to lose further altitude.

Betting against Swiss currency cap is high stakes

27 Nov 2014

Traders are testing the central bank’s franc ceiling and using options to bet the currency will break through. The wager is inspired by euro weakness and a looming referendum on whether the SNB should buy more gold. This is one monetary authority the market is unwise to take on.

Russian central bank intervention is a dead end

8 Oct 2014

The central bank of Russia is buying roubles on the market, but the exchange rate keeps sinking. The economy has deep structural flaws, worsened by Putin’s aggressive foreign policy. There are many reasons to take capital out of Russia. For the currency, the only way is down.

Cross-border bank whippings won’t dent dollar, yet

8 Jul 2014

It’ll take a lot more than multibillion-dollar fines from U.S. regulators to wean global trade from its greenback dependency. Politicians like France’s finance minister may moan but firms won’t ditch the buck as long as it’s more convenient to keep using it – up to a point.

Tranquil markets may lead emerging nations astray

19 Jun 2014

The return of calm to bond markets is not an unalloyed boon for developing economies. With exports to rich nations stalling, many may be tempted to make use of easy-money conditions to inflate bubbles in domestic assets. Any pickup in GDP growth will be illusory.

Forex is weakest link in UK market abuse crackdown

12 Jun 2014

Chancellor George Osborne is attacking manipulation of currencies, interest rates, and other assets. Wrongdoers face jail. The moves are sensible and other EU countries plan something similar. But there’s a big problem: still no global rules to tell FX traders what is acceptable.

Fine global monetary ideals clash with reality

17 Apr 2014

Central bankers want better bulwarks to protect emerging economies from sharp capital shifts - and to shrink the huge war chests of hard currency. The sentiments are worthy, but it looks like the high watermark of global cooperation in monetary policy passed a few years ago.

Draghi abandons threadbare G7 currency truce

15 Apr 2014

The ECB chief’s promise to ease policy if the euro rises makes him the latest to flout big developed countries’ agreement not to use exchange rates as an economic tool. Competitive devaluations are wars with few winners. But further currency conflict looks almost unavoidable.

Official attention will make or break bitcoin

31 Mar 2014

Scrutiny from tax authorities and regulators may deter off-the-grid types who like the digital money for its anonymity. Yet interest from investors and even creators of derivatives could start drawing bitcoin into the mainstream. Either way, its days in the shadows are over.

Scandal will reshape FX trading dynamics

11 Mar 2014

Probes into possible currency market manipulation will speed up industry change. The shift to electronic trading will be accelerated, squeezing banks’ trading profits. And with traders cagier about sharing juicy titbits on flows, exchange rates may start to move differently.

Who bails out bitcoin depositors?

25 Feb 2014

The pseudo-currency’s main exchange has disappeared from cyberspace, leaving customers at least temporarily bereft. Bitcoin’s supposed attraction is being government-free. When things go awry, users learn why conventional finance has expensive regulation and political backstops.