Currency

The euro’s serene summer may come to an abrupt end

29 Aug 2013

Europe’s single currency has risen against the dollar in the last two months, avoiding the gyrations which have plagued global bond and equity markets. But the mood is souring. Investors are flocking to the options market to bet the euro will fall. The odds are it will.

Sterling flirts with safe-haven status

12 Aug 2013

The pound has a lot against it, including dovish central bank rhetoric, but Britain is returning to growth as the euro zone struggles. And while the U.S. may soon taper QE, the UK has already parked the policy. The cheap British currency looks like a good bet.   

Safe havens face three-pronged assault

3 Jul 2013

Markets have corrected but safe havens are still vulnerable. U.S. dollar strength is bad for gold, bonds, and the Aussie dollar. A euro zone out of acute crisis is bad for the Swiss franc. And even a tepid economic recovery will attract funds out of safe havens into stocks.

Bitcoin ETF signals time to make market in cash

2 Jul 2013

A virtual currency fund IPO means there will now be an index tracker for almost everything. Except that financial engineers have ignored the most important asset class of all. No more. Say hello to the Breakingviews Dollar Trust. It makes holding cash as easy as trading a stock.

Markets suffer too much central bank attention

12 Jun 2013

It’s Goodhart’s law: indicators start misbehaving as soon as they are seen to be telling gospel truths. The monetary authorities think strong asset markets and weak currencies will help growth, but their financially orientated policies are now more confusing than helpful.

Inflation arises from popping EM asset bubbles

5 Jun 2013

Mere talk about Fed tapering has been enough to reverse the previous flood of foreign money into emerging market bonds and stocks. As these bubbly assets deflate, currencies are falling in Turkey, Brazil and Mexico. That will push up inflation and cut into growth.

New groat plan could suit an independent Scotland

23 Apr 2013

The UK exaggerates the difficulties of operating a “sterling zone”. But an independent Scottish currency - call it the groat - is workable. Though there are risks, a new money order would bring advantages for self-determination, macro policy, growth and employment.

IMF crowd should cut Japan some slack

19 Apr 2013

Prime Minister Shinzo Abe’s economic policies are in for a drubbing at the fund’s spring meeting. IMF officials bemoan Japan’s “risky” fiscal stimulus while America grumbles about the yen. But Japan, which is one of the IMF’s staunchest supporters, was right to act.

Colombia sets good stimulus example for Latam

16 Apr 2013

The Andean nation is trying to goose its slowing economy by spurring private pension funds to invest more abroad and inducing public ones to buy $5 bln in foreign exchange locally. It’s a welcome contrast to protectionist measures used nearby. Colombia is winning the currency wars.

Currency wars worsen risk of trade insurgencies

11 Apr 2013

Last year’s weak trade growth won’t get much better in 2013, the WTO reckons. Boss Pascal Lamy worries about rising protectionism. With Japan the latest big economy to deploy monetary policy to weaken its currency, the temptation to respond with trade barriers can only increase.

Bitcoins need more than fear and love to thrive

25 Mar 2013

The value of the digital currency beloved by inflationistas and libertarians has shot up more than 60 pct in a week thanks to the Cyprus-infused panic over deposit insurance. But it currently has too many drawbacks: utility, not emotion, will determine whether Bitcoins catch on.

Weak pound need not turn into sterling crisis

4 Mar 2013

The soft pound suits UK policymakers. Along with low gilt yields, it helps stimulate the economy. But if it falls too far and too fast, gilt yields would rise and decline could turn to rout. Further quantitative easing is risky, overt monetary financing would be disastrous.

Moody’s shaming brings UK gain in currency war

25 Feb 2013

The loss of triple-A is humiliating, but that’s now history. The lingering effect of Moody’s action is a weaker pound, and that should serve to stimulate exports, GDP growth and inflation. If so, there’s less risk of unlimited BoE money printing when Mark Carney takes charge.

Ethical economy: The menace of financial markets

20 Feb 2013

Are free and open markets for stocks, bonds and currencies the glory of the capitalist system? Quite the contrary. Because financial assets have no clear value, these markets are always too influenced by disruptive wild emotions, and encourage destructive greed.

Long-view investors need to embrace FX appeal

18 Feb 2013

Old-school asset managers often see currencies as good for nothing but cost, risk, and occasional windfalls. But recent yen and euro shifts graphically show that exchange rates can bring handsome returns. If FX is where the action is, that’s where active asset managers should be.

Counterpoint: The UK would be mad to join the euro

15 Feb 2013

When Edward Hadas reviewed the arguments on Britain joining the single currency, he said the UK’s economic position would be improved by membership. But why sign up to a project which remains flawed, even after the latest anti-crisis measures?

G7 only adds to global currency confusion

12 Feb 2013

In a four-sentence statement, the finance ministers of the world’s leading powers have managed to ignore the problem of inadvertent competitive devaluations, contradict themselves and make an empty promise. Currencies still look like the global economy’s weak point.

Currency war is not worth fighting

29 Jan 2013

The downside of competitive devaluations is clear: international ill will and higher risks of both inflation and financial disorder. The upside is less clear. In developed economies, devaluations don’t always boost exports. They can also defer helpful reforms.

China FX swap may blur Bank of England mandate

28 Jan 2013

The central bank is under pressure to set up a swap facility with its Chinese counterpart. Doing so would boost renminbi trading in London. But the BoE’s main concern should be financial stability, not the City’s competitiveness. Confusing the two would be a mistake.

Europhobic pound faces year of two halves

23 Jan 2013

The pound is sliding. An EU membership referendum is a definite new negative. Trade and public finance data feed the doubts. A poor GDP figure and snow may compound the weakness. But the UK is still expected to outpace the euro zone this year. Decline may turn into opportunity.