Currency

Why the dollar keeps winning in the global economy

28 Feb 2023

The greenback’s share of foreign exchange reserves is at 59%, a two-decade low. Challengers to its role as the world’s means of exchange abound. Yet the globalised financial system bolsters its lynchpin status. Absent major shifts in capital flows, the U.S. currency will thrive.

How investors can profit from Fed-ECB divergence

7 Feb 2023

As America flirts with a recession, the U.S. central bank is set to stop tightening as interest rates near 5%. That will leave ECB President Christine Lagarde as the West’s most hawkish policymaker. The transatlantic split is an opportunity for traders who bet on European assets.

Britcoin flags promise of cashless world, and risk

7 Feb 2023

The UK plans to make up for being a late e-money adopter by widening access to its digital currency plan. Right now banks are the main way to access physical cash, but online equivalents could be more widely distributed. The business of money could get messy.

Three carry trades for a new monetary policy era

27 Jan 2023

Central banks’ moves mean that investors borrowing money in yen and placing it in U.S. assets – a once-popular “carry trade” – are no longer onto a sure-fire winner. They can do better by shorting the euro and investing in Mexico, Brazil or Hungary.

Capital Calls: British jolt

17 Jan 2023

Concise views on global finance: The collapse of UK battery group Britishvolt leaves a gaping hole in the country’s auto manufacturing sector.

Expansionist dreams threaten ECB digital euro plan

17 Jan 2023

As the European Central Bank develops its own online currency, politicians want a big say. Hostility from some rubs against the ECB’s cautious enthusiasm. Yet if political forces push a digital euro to be more global than the ECB is ready for, it may weaken financial stability.

Ackman’s Hong Kong short is logical, not likely

24 Nov 2022

The hedge fund boss is wagering the local currency’s dollar peg will snap. The economic case is stronger than during his last try in 2011: the peg is forcing rate hikes even as the highly-leveraged city’s economy contracts. But the risks of alternatives might stay Beijing’s hand.

Japan lives at the bleeding edge of good enough

11 Nov 2022

Energy costs are spiking, the currency plunging, the population aging. Growth is meh. Tokyo, afraid of being left behind, is trying to compete with Silicon Valley. Yet returns on innovation may be overestimated. The country’s biggest problems are a matter of will, not patents.

Hong Kong’s steep slide shows misplaced priorities

1 Nov 2022

Economic activity plunged 4.5% in the third quarter as consumers and companies slashed spending. The government is trying to rally support for fintech and finance, but appears to have no clear plan to help mundane sectors like real estate and retail which are the biggest drags.

Delusions of grandeur are root of Britain’s chaos

21 Oct 2022

“Trussonomics” followed hot on the heels of Brexit. Both are symptoms of a country that hasn’t fully come to terms with the loss of its empire, says Hugo Dixon. If the UK now realises it can’t defy the laws of economics and geopolitics, it may emerge wiser albeit weaker.

UK still two U-turns away from financial stability

14 Oct 2022

Prime Minister Liz Truss sacked her finance minister after less than six weeks because his unfunded tax cuts roiled markets. She will now attempt a more fiscally sound approach. But her party may decide it needs another leader, while voters may prefer a change of government.

Capital Calls: Buffett’s Berkshire successor

4 Oct 2022

Concise views on global finance: The Omaha oracle owns $100 bln of stock in his conglomerate. His potential successor Greg Abel’s purchase of $68 mln of stock last week – after selling shares in a subsidiary for $870 mln in June – is too small a move toward Buffett’s standard.

Tax U-turn leaves UK’s Truss with credibility gap

3 Oct 2022

Prime Minister Liz Truss’ move to scrap a tax cut for high earners lowered government bond yields and boosted the pound. But her policies still rely on unfunded giveaways and rosy growth hopes. Investors’ loss of confidence from the crisis makes her agenda even harder to achieve.

South Korea gets short end of U.S. trade stick

3 Oct 2022

Seoul wants to sell more chips and other goods overseas, but Washington is luring Samsung and compatriots to make in America. A trade deficit and crashing won offer a glimpse at what a U.S. revival in high-tech manufacturing means for the $1.8 trln trade-dependent Asian economy.

Currency crash forces Beijing back into bad habits

30 Sep 2022

The yuan touched 7.2 per dollar, a level not seen since 2008. Verbal warnings to the market achieved little, so the central bank has relapsed to using blunt force to restrain prices and is prepping banks to dump dollars. That’s bad for liquidity, and damages credibility.

Capital Calls: Apple tests discretionary spending

28 Sep 2022

Concise views on global finance: The company’s reversal on iPhone 14 production is a sign that inflation-battered consumers are thinking differently about discretionary items.

BoE’s bond-buying U-turn is worth the risk

28 Sep 2022

The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.

Investors strangle UK’s pro-growth budget at birth

26 Sep 2022

Government bond yields soared and the pound slumped following Chancellor Kwasi Kwarteng’s 45 bln pound tax cut package. Higher interest rates will depress demand while costlier energy imports will further weaken the public finances. That risks cancelling out any boost to growth.

Tokyo blinks in game of forex chicken

22 Sep 2022

Japan has responded to the Federal Reserve’s rate hikes by moving to prop up the staggering yen, the first intervention since 1998. The country’s economy and Bank of Japan Governor Haruhiko Kuroda’s loose policy make it unlikely the plan will work. The attempt may even backfire.

Capital Calls: Novartis

22 Sep 2022

Concise views on global finance: The Swiss drugmaker hopes to fix its growth problem by listing its generic drug business and focusing on the U.S. market.