Currency

Egypt’s Brotherhood meets financial reality

7 Jan 2013

The fall of the pound creates inflationary pressure and capital controls underscore the shrinking of foreign reserves. Egypt’s ruling Brotherhood must finalise an unpopular deal with the IMF or risk a currency meltdown. Neither option is appealing ahead of elections.

Iran at risk of draconian response to rial slide

3 Oct 2012

Tehran’s attempt to ease pressure on the currency helped trigger this week’s sudden and sharp slide. Iran has limited short-term options to stem the panic. A deeper rebalancing of the economy is required. But in tough times that might just result in a more bullying state.

World without dollar primacy a blast from the past

26 Sep 2012

Goldman boss Lloyd Blankfein reckons the dollar’s reserve status may be at risk. Having no dominant currency would hark back to the 18th century, when silver pieces of eight competed with many other coins. Specialist currencies might emerge, but trading costs could rise.

Egypt’s posturing pound pledge may return to bite

28 Aug 2012

Mohamed Mursi has ruled out a devaluation days after a senior advisor acknowledged its necessity. But Egypt would need a swift recovery in tourism and foreign investment, the end of insecurity and a deal with the IMF, for its president not to eat his words.

US derivatives leader makes timely push on Europe

20 Aug 2012

CME plans a London derivatives exchange. By starting in currencies it avoids tackling rivals NYSE and Deutsche Boerse head-on. The timing is also canny. Private trading is migrating to bourses and moving earlier might have made it easier for NYSE-DB’s merger to win approval.

Ethical economy: The touchstones of Yap

11 Jul 2012

The Pacific island of Yap used two-tonne stones as currency. The odd system worked because people believed in it. The modern monetary system is also faith-based, and that faith has been shaken by the financial crisis. Purification is needed to strengthen the value of money.

Scots aim to break Europe’s working currency union

9 Jul 2012

Europe does have a successful currency, fiscal and banking union - in the United Kingdom. Scottish nationalists want to go backwards, towards the weaknesses of the euro zone. In Edinburgh as in Brussels, it’s dangerous to let politics get the better of financial reality.

Anti-euro prize strengthens case for euro

5 Jul 2012

The offer of 250,000 pounds for the best way to untangle the single currency was supposed to make a breakup more plausible. The winning Wolfson Prize entry shows how it might be done. But the proposal is so messy that it supports the opposite case: a breakup shouldn’t happen.

Hong Kong, enjoy your peg while it lasts

27 Jun 2012

Hitching the Hong Kong Dollar to the U.S. greenback brought 30 years of something like stability. Now it brings inflation and high property prices. Yet the alternatives are messy, and the peg has a symbolic value. The status quo is best, until China offers a good replacement.

India’s finance minister goes out with a flop

25 Jun 2012

Talk about over promising and under-delivering. Pranab Mukherjee inflated the market’s hopes that he’d take bold measures to boost investor confidence, but came up with a few small tweaks - on his last day as finance minister. Hopefully his successor will talk less and act more.

Denmark is another costly refuge

21 Jun 2012

In search of a safe haven? Denmark ticks the boxes. The economy is strong and the krone isn’t the euro, but shadows it. Tempted investors should think hard. The central bank is against them and two-year yields are negative. Investors only win if Germany exits the euro.

Eurogeddon would drive Swiss to capital controls

13 Jun 2012

The Swiss decision to peg the franc is working. GDP is increasing and deflation persists despite the central bank’s liberal money-printing. The SNB will go further, to emergency capital controls, if the euro crisis worsens. The worry is there’s no end to currency poker in sight.

Perhaps the Swiss should just join the euro?

28 May 2012

The Swiss National Bank is engaged in an expensive battle against savers who want to flee the euro for Swiss franc safety. Instead of fighting, perhaps the country should join the single currency. Exports would do well, German-style. But there might be nasty consequences.

"Geuro" could be least bad Greek solution

21 May 2012

Greece would run out of euros if it reneged on its bailout. But it could keep the euro as the official currency and issue IOUs that became alternative tender, or “geuros”, argues Deutsche Bank. Such dual currency regimes are unstable. But the geuro might just help Greece recover.

The rupee looks vulnerable

30 Apr 2012

India’s ballooning trade deficit means it has to run just to stand still. Without steady capital inflows, the currency will collapse. The rupee’s 19 percent fall against the dollar over the past year is worrying. Predictions of further decline could become self-fulfilling.

Japan’s yen yearning takes dismal corporate turn

24 Feb 2012

Toshiba and Sony are tapping $2.4 billion in loans from a government fund designed to promote M&A abroad and weaken the yen. But companies are spending the money on the kind of foreign forays Japanese firms use to avoid reform at home. Japan can’t afford such misadventures.

Shanghai needs bigger ideas to be a global hub

1 Feb 2012

The Chinese city has outlined ambitious plans to build a global yuan trading centre by 2015. But key reforms are missing. Without freer capital flows, exchange rate flexibility, and a more open financial regime, Shanghai’s markets can be huge, but not really international.

New currency unions could yet see the light of day

20 Dec 2011

The euro is in deep trouble. But if leaders successfully realign political and fiscal policies with monetary facts on the ground, it could set a precedent. Single currencies have big economic and geopolitical advantages. Gulf states and South America might yet embrace the idea.

No happy euro Christmas for U.S. markets

14 Dec 2011

Last week’s European summit in the end did little to address the region’s immediate problems. That’s dragging down the euro, commodities - oil and gold by 5 pct on Wednesday - and U.S. stocks. It could all make for skittish trading as investors aim to avoid year-end surprises.

How a 1990s sterling currency area might now look

14 Dec 2011

In 1992, the UK abandoned plans to adopt the euro. Martin Hutchinson imagines what would have happened if Britain had used its economic strength in the mid-1990s to form its own alternative currency bloc. The sterling zone would at least be insulated from troubles elsewhere.