Currency

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.

Inflation raises stakes in Hungary’s EU war

17 Jun 2022

PM Viktor Orbán’s tight political grip largely kept investors happy. Yet inflation fears are now pushing the forint to record lows. Unlocking 7 bln euros in EU funds could restore the autocrat’s power-and-prosperity sweet spot. That makes his hostility to the bloc more costly.

Crashing yen disturbs Haruhiko Kuroda’s zen

15 Jun 2022

Japan’s currency is at its weakest against the U.S. dollar since 1998 and bond traders are revolting. It disrupts the central bank governor’s meditations on the mystical balance between growth, public debt and near-zero rates. Stagflation risk suggests a new mantra is warranted.

Inflation-shy investors try on “least dirty shirt”

9 Jun 2022

Interest rates in the developed world lag far behind rising prices. That’s sent savers flocking to traditional safe havens to preserve their capital. Edward Chancellor argues that emerging-market currencies may offer a more appealing alternative to financial repression at home.

Capital Calls: Stablecoin’s safety measures

19 May 2022

Concise views on global finance: As crypto assets wobble, Tether, with $75 bln worth of digital tokens in circulation pegged to the U.S. dollar, is boosting its reserves of cash and U.S. Treasury bills while shrinking its commercial paper holdings.

Stablecoin panics may be a feature not a bug

17 May 2022

Crypto tokens like Terra and $80 bln Tether were supposedly pegged to the dollar. Yet the former failed and the latter wobbled. Holding 100% cash reserves would help. But there’s no fun, or money, in that. Users can always flock to the new, sketchy coin offering juicy rewards.

Fed has a spreading inflation problem

11 May 2022

U.S. consumer prices rose at an annual rate of 8.3% in April. While that was lower than the four-decade high seen a month earlier, food costs leapt by the most since 1981 and shelter grew more expensive. Broadening price pressures mean there’s no respite for Chair Jerome Powell.

Stablecoin crash drags crypto ideals back to earth

11 May 2022

TerraUSD, a digital token supposedly pegged to the U.S. dollar, slumped to a fraction of that. The popular store of value is vulnerable because its design is based on trading incentives, not hard reserves. For crypto fans there’s a tradeoff between decentralisation and stability.

Zimbabwe borrows from bank of bad ideas, again

10 May 2022

With inflation at 96%, Harare plans to stop further currency slumps by a ban on bank lending. That stymies a sly trade where insiders play the spread between official and black-market FX rates. But as with prior moves it’s a blunt tool that erodes rather than builds confidence.

Stars align for UAE to become a global crypto hub

6 May 2022

Big exchanges Binance, FTX and Kraken are expanding in Dubai and Abu Dhabi as local regulators grant licences to trade virtual assets. The world’s leading financial regulators have been wary of cryptocurrencies. A variety of factors give UAE the chance to steal a march on them.

European banks mount fragile trading fightback

5 May 2022

The markets divisions of Deutsche Bank, BNP and Barclays are outpacing U.S. rivals, reversing a decade of plunging market share. Yet sustaining that growth will be hard, and shareholders clearly dislike the business. It may be a blip on a long-term trend of American dominance.

Russia plays the fool in its own default theatre

3 May 2022

Moscow looks set to meet foreign currency bond payments, after saying a month ago it could only pay in roubles. High oil and gas prices mean it has ample revenue to meet its obligations. But the debt grandstanding may not yet be over, notably if the EU imposes an energy embargo.

Bitcoin’s African outpost raises several red flags

2 May 2022

War-torn Central African Republic is following El Salvador in adopting the crypto unit as legal tender. The surprise of the region’s central bank and Bangui’s use of sanctioned Russian mercenaries are warning signs. Bitcoin’s quest for mainstream acceptance just got harder.

Dollar is worst reserve choice except for the rest

27 Apr 2022

Sanctions on Russia raise questions about the U.S. currency's reliability for foreign governments. But options like the euro are also tied to restrictions. And the Chinese yuan lacks convertibility, rule of law and safe-haven appeal. Reports of the dollar's demise are premature.

Capital Calls: Britain’s beefed-up M&A watchdog

25 Apr 2022

Concise views on global finance: The activist building its stake in video-ratings firm Nielsen may face a potential snag, thanks to the UK’s answer to U.S. cross-border merger cop CFIUS.

Rouble’s strength is sign of Russia’s weakness

6 Apr 2022

The Russian currency has appreciated 70% against the dollar since early March. Capital controls, 20% interest rates, and forced conversion of export revenues have been enough to push it up in very thin trading volumes. The rebound is a sign of economic woes, not resilience.

EU’s Ukraine currency fix is a problem best shared

29 Mar 2022

The ECB wants the European Union to guarantee potential losses when Ukrainians fleeing the war change their currency into euros. A rival plan would leave this up to national governments. The pooled scheme is much more likely to give Ukrainians hope in the value of the hryvnia.

Bank of Japan stumbles into defensive minefield

29 Mar 2022

War, Covid-19 and an aggressive-looking Fed are conspiring against Governor Kuroda’s ultra-loose policy. The yen is plunging and government bond yields are up despite BOJ efforts. There’s no easy solution, but doing nothing is risky too.