Currency

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.

Bank of Japan needs to pick yen battles carefully

15 Sep 2022

The central bank is signaling it may soon intervene as its currency hits 24-year lows. Slowing rather than reversing the U.S. dollar’s rates-driven strength may be achievable, but even that demands a cannier deployment of weaponry than just throwing money at the problem.

UK tax cut drive has narrow path to avoid big mess

30 Aug 2022

Candidates to replace Prime Minister Boris Johnson are debating lowering levies by up to 30 bln pounds. Inflation may help by raising tax revenue faster than spending. But future receipts are uncertain, and a likely energy bailout will add to the burden. It’s an ill-timed gamble.

Capital Calls: Amazon’s green coupons, Peloton

25 Aug 2022

Concise views on global finance: The internet giant’s promise to try green hydrogen technology is valuable to firms like Plug Power, so Amazon demands a taste. Investors in the exercise-bike maker suffer a rapid descent after dismal fourth-quarter earnings.

SoftBank chagrin is poor defence against bad bets

8 Aug 2022

The Japanese investor suffered a $23 bln net loss from falling markets and a weak yen. Boss Masayoshi Son says he has learned lessons. But exiting ride-hailer Uber with a 5% annual return supports the view of SoftBank as a firm that can only follow, not outperform, the crowd.

Dollar snares U.S. firms in $4 trln endurance test

29 Jul 2022

The rising greenback is eating into profits and stock prices, owing to the roughly 30% of U.S. companies’ revenue that comes from overseas. Even so, the Fed and White House have tended to let the dollar do its thing. What investors lose today, they’re likely to regain tomorrow.

ECB risks forgetting 1990s currency crisis lessons

18 Jul 2022

President Christine Lagarde may soon unveil the central bank’s tool to control sovereign bond yields. Struggles with semi-fixed exchange rates before the euro offer a cautionary tale. To fend off speculative attack, authorities are best off keeping targets and methods vague.

Japan’s post-Abe future, Europe’s currency problem

14 Jul 2022

The assassination of former Prime Minister Shinzo Abe is an end of an economic era. In this Viewsroom podcast, Breakingviews columnists debate how his party’s success could bring about big spending. Also, the euro’s decline is a problem for central bank chief Christine Lagarde.

Euro weakness forces itself on ECB’s agenda

12 Jul 2022

The single currency is nearing parity with the dollar for the first time in 20 years. It’s due to the U.S. economy’s strength and fears of a continental gas crisis. It also reflects the European Central Bank’s late response to inflation, which a weak euro makes harder to fight.

Raging crisis puts Sri Lanka’s creditors on spot

11 Jul 2022

Protesters are forcing out the president after petrol pumps ran dry. It removes one obstacle to an IMF rescue. Now bondholders need to swallow big losses on Colombo’s $50 bln of foreign debt. An ugly global economy means citizens and lenders face a long, hard road to recovery.

Hong Kong banks are slow to gain from rate rises

7 Jul 2022

The Asian hub must track the Fed’s rate hikes to preserve its currency peg, but commercial lenders can’t follow so quickly. That reflects China’s weak growth and long term, the awkwardness of the 39-year-old system. Near term, it’s a profit drag for HSBC and Standard Chartered.

India’s crisis buffers are part optical illusion

4 Jul 2022

New Delhi is loosening purse strings to cushion imported inflation as the central bank hikes rates. Rising trade and fiscal deficits put economic recovery at risk, but there’s no good alternative. In that context, throwing precious reserves at a plunging rupee could be rash.

Capital Calls: Russian default, Inflation and debt

27 Jun 2022

Concise views on global finance: Moscow defaulted on its foreign debt for the first time in over 100 years, leaving bondholders in limbo; the Bank for International Settlements wants rates raised “quickly and decisively”, but is also worried about higher borrowing costs.

Investors need to learn to ride inflation cycle

23 Jun 2022

Bonds and shares are tumbling as prices soar, just as in the 1970s. The experience of that decade suggests value stocks, commodities and safe-haven currencies offer the best protection, says Edward Chancellor. But wild swings in inflation can still catch markets off-guard.