G8 forex

Tudo sobre as cruzes de moeda.
pela Walker England.
As taxas de câmbio são cotadas em pares principais par moedas principais de referência, juntamente com as principais moedas de referência de Cross Pairs de USD, juntamente com uma moeda não norte-americana.
As taxas de câmbio são cotadas usando duas moedas, que então são combinadas para criar um par de moedas. A maioria desses pares são criados usando as moedas do G-8 listadas abaixo que são divididas em duas classificações, Pares Principais e Pares Cruzados.
Até ao dia, continuaremos a nossa revisão explicando brevemente o significado de uma cruz de moeda.
Pares cruzados de moeda.
& ldquo; Major Pairs & rdquo; são consideradas quando qualquer uma das principais moedas do G8 é acoplada com o USD, como o EURUSD. Um par cruzado é aquele que não inclui o USD. Estes pares cruzados de moeda foram criados para facilitar o processo em que os comerciantes poderiam trocar dinheiro. Não só as transações foram simplificadas sem primeiro ter que converter para o USD como um meio comum, mas agora os comerciantes também podem negociar, evitando a volatilidade do USD.
O outro grande benefício para negociação de pares cruzados é para os seus fortes mercados de tendências. Um exemplo de um par cruzado de moeda é o EURAUD. Para o ano de negociação de 2018, o EURAUD moveu um total de 3378 pips de baixo a alto. Este é quase 4x o movimento do EURUSD! O major da EURUSD só conseguiu um movimento de 848 pips, medido de baixo para alto para o ano de comércio de 2018. Outros pares cruzados para o Euro incluem o EURGBP, EURAUD e EURJPY para citar alguns. Então lembre-se da próxima vez que você abre sua plataforma, há oportunidades fora das principais empresas, e busque os cruzamentos de moeda.
--- Escrito por Walker England, Trading Instructor.
Siga-me no Twitter no @WEnglandFX.
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O DailyFX fornece notícias e análises técnicas sobre as tendências que influenciam os mercados monetários globais.
Próximos eventos.
Calendário econômico Forex.
O desempenho passado não é uma indicação de resultados futuros.
DailyFX é o site de notícias e educação do Grupo IG.

G8 forex
Desenvolvendo uma aplicação móvel que envia as atualizações de taxas sms forex por data para assinantes. Uma interface (campo de texto de login) será fornecida para usuários interessados ​​para se inscreverem para que as atualizações se tornem assinantes.
Os detalhes dos assinantes, ou seja, o nome, o número de telefone, o provedor de serviços móveis serão armazenados e monitorados pelo servidor Alerta e armazenados no banco de dados dos provedores de serviços, ou seja, enviando os alertas forex que se insere entre o assinante e o provedor de alertas forex.
Um servidor se refere a um computador de alto desempenho usado em empresas e outras organizações. Fornecer serviços para usuários finais e clientes.
Antes de prosseguir com o desenvolvimento, a equipe teve primeiro a compilar os Requisitos Funcionais / o Escopo do Produto, isso pertence exclusivamente ao item que está sendo desenvolvido e não ao projeto inteiro. Isso, portanto, canaliza os esforços das equipes ao longo do projeto. No entanto, vamos dar uma olhada no Escopo geral do projeto;
Desenvolva 2 Bancos de dados de back-end usando mySql para armazenar assinaturas e dados de informações de Forex Criar Middleware, usando o Glassfish, este middleware é basicamente o Servidor virtual que envia mensagens de alerta (mensagens forex) aos clientes subscritos. Desenvolva o site do Projeto através do qual os clientes podem se inscrever para receber atualizações. Configure a conexão GPRS para se comunicar com os bancos de dados Back-end do lado do cliente para o Middleware via Http. Project Bases de dados.
O banco de dados consiste em seis campos: primeiro campo para o ID dos assinantes, segundo campo para o primeiro nome, segundo nome, login, número de telefone, telnet-trabalho, respectivamente.
O banco de dados de Forex tem quatro campos: primeiro campo para o id forex, segundo para o nome forex, assinantes e moeda.
Tarefas & amp; Ações.
Obtenha rapidamente o seu time trabalhando nas áreas de projeto que são responsáveis ​​com as Tarefas & amp; Página de ações.
Documentos de projeto.
A organização é fundamental para qualquer projeto bem-sucedido e com a página você pode manter todos os documentos do projeto em um lugar acessível a toda a equipe.
Atualizações recentes.
Mantenha sua equipe informada e acompanhada usando a página de atualizações recentes.
Entre imediatamente em contato com o gerente de projeto usando a página de contato.

G8 (Grupo de 8)
O G8, ou o Grupo dos 8, atua como um fórum para discussões para as 8 maiores nações industrializadas do mundo.
As atuais nações do G8 são o Canadá, França, Alemanha, Itália, Japão, Reino Unido, Estados Unidos e Rússia.
A presidência do grupo gira todos os anos para ser realizada por um dos Estados membros. O titular da presidência define a agenda, hospeda a cúpula, e agende e determina as reuniões ministeriais.
O G8 é entendido como uma rede internacional em vez de uma organização; não possui uma estrutura administrativa. As reuniões são informais para proporcionar um ambiente descontraído para a discussão de tópicos e questões globais.
Os chefes de governo dos estados do G8 se reúnem na cúpula anual do G8 e há consultas contínuas entre os membros, de acordo com o processo do G8. Há também reuniões separadas com países fora do G8, por exemplo, o G8 + 5, que inclui os chamados países de "divulgação" - Brasil, China, Índia, México e África do Sul, todos os quais são estados do BRICS, exceto o México.
A gama de tópicos inclui saúde, aplicação da lei, desenvolvimento laboral, econômico e social, energia, meio ambiente, assuntos externos, terrorismo e comércio.
Composição.
Leitura adicional.
Saiba mais sobre os fundamentos das economias e das moedas:

G8 forex
Ao abordar a crise financeira / crédito / economia, os governos de todo o mundo reduziram as taxas de juros, resgataram as instituições financeiras falidas, se envolveram em impressão de dinheiro por atacado, dívida garantida e dinheiro bombeado em suas economias. No entanto, embora esses programas tenham tido algum impacto atenuante sobre a crise, eles fizeram pouco para resolver a causa subjacente. Especificamente, a dívida foi simplesmente transferida de uma instituição - um balanço - para outra. A maior parte da dívida ruim que foi o cerne da crise do crédito ainda é notável; O único que mudou é quem é responsável por reembolsá-lo.
Em muitos casos, são os governos que assumiram a posse dessa dívida. Fannie Mae e Freddie Mac permanecem em uma conservadora do governo dos EUA. O Banco da Reserva Federal possui mais de US $ 2 trilhões em títulos do Tesouro dos EUA e títulos garantidos por hipoteca. A União Européia concordou em retirar coletivamente mais de US $ 500 bilhões em dívidas pertencentes à Grécia e outros Estados membros "problemáticos" não especificados. O governo japonês conseguiu transferir 90% de sua dívida soberana para seus próprios cidadãos. O Tesouro do Reino Unido imprimiu dinheiro e emprestou ao governo do Reino Unido. [O gráfico abaixo é realmente interativo, e vale alguns minutos de exibição].
Então, quais são as possibilidades de lidar com essa dívida? Em termos de dívida pública, o primeiro é esperar que as economias possam crescer mais rapidamente do que a dívida, de modo que ela se torne mais gerenciável em termos relativos e que um dia possa ser reembolsado. Outra opção é aumentar os impostos e / ou cortar gastos e usar os fundos extras para aposentar a dívida. Dado o ambiente econômico atual, a primeira possibilidade é improvável. As economias industrializadas continuam a paralisar, e grande parte desse crescimento está sendo financiado com novas dívidas. A última opção equivaleria a suicídio político; qualquer governo que seja politicamente ingénuo o suficiente para aprovar quaisquer medidas de austeridade será eleito fora do cargo nas próximas eleições. (Com a temporada de eleições prestes a começar, ganhamos / temos que aguardar por confirmação!)
A única alternativa é reduzir o montante real da dívida através da inflação monetária ou da depreciação da moeda. Nos EUA, a inflação está em um mínimo de 50 anos. No Japão, é inexistente. No Reino Unido e na UE, os preços não estão crescendo. Os formuladores de políticas monetárias em todo o mundo estão agora tentando ativamente estimular a inflação (por razões não relacionadas à redução da dívida), mas sem sucesso. As taxas de juros já estão no fundo do rock e os Bancos Centrais injetaram bilhões de dólares recém-cunhados em circulação sem qualquer impacto nos preços.
A desvalorização da moeda já está ocorrendo, mas os principais participantes são economias de mercado emergentes (que, aliás, estão mais preocupados com a competitividade das exportações do que reduzindo o tamanho das dívidas). O iene japonês aproxima-se de um máximo histórico, enquanto o euro se recuperou dos mínimos da primavera. A Libra britânica está perto da sua média de longo prazo, enquanto o dólar norte-americano diminuiu apenas ligeiramente em uma média ponderada pelo comércio. No final, uma vez que todos esses países são caracterizados por altos níveis de dívida, seria impossível para todos eles desvalorizar suas moedas. Além disso, a natureza da união monetária do euro impede que os países da zona do euro baixem suas dívidas através da desvalorização da moeda.
A história é a mesma para a dívida privada. Por exemplo, a maior parte da dívida imobiliária (comercial e residencial) associada ao colapso do mercado imobiliário ainda não foi cancelada. As instituições financeiras e os investidores continuam a mantê-lo com a esperança de que o mercado imobiliário logo se recuperará, de modo que as perdas nunca precisarão ser reconhecidas. Embora esta estratégia possa reivindicar os credores / investidores no longo prazo, continua a ter um efeito devastador no curto prazo, pois obriga os detentores da dívida a manter mais dinheiro em seus balanços, onde não encontrará o caminho na economia global.
Quais são as implicações para os mercados cambiais? Ou seja, parece apoiar a noção de que as moedas dos mercados emergentes continuarão a superar as moedas do G4 no longo prazo. No curto prazo, é possível que as moedas do G4 experimentem alguma apreciação, tanto pelo refluxo quanto pelo fluxo de apetite de risco e as intervenções dos bancos centrais dos mercados emergentes em nome de suas moedas. No longo prazo, no entanto, a única alternativa realista ao padrão é a desvalorização da moeda, e em algum momento, os mercados de divisas terão que chegar a um acordo com o fato de que as moedas do G4 precisam diminuir. [Gráfico acima, cortesia de The Economist].
O Mercado Forex Inverte como Mercados Emergentes Soar.
Como mostrei na publicação da última sexta-feira (Volatility, Carry, Risk e Forex Markets), a volatilidade vem diminuindo nos mercados cambiais desde o pico após o colapso do Lehman Brothers. Na verdade, a volatilidade entre as moedas dos mercados emergentes vem caindo particularmente rápido e, recentemente, aconteceu algo incrível: a volatilidade implícita de três meses para as sete maiores moedas dos países em desenvolvimento caiu para 10% em março, em comparação com 11,4% para países industrializados . & # 8221; Essa inversão poderia se classificar como um dos desenvolvimentos mais importantes deste ano em termos de seu impacto no forex. O único subcampeão que penso é que a LIBOR japonesa está abaixo da LIBOR americana.
Apesar do seu carácter notável, esse desenvolvimento não é surpreendente, uma vez que 8 dos 10 melhores artistas em Forex este ano são moedas de mercado emergentes, lideradas pelo Colón da Costa Rica, Peso Mexicano e Ringgit da Malásia. Ainda assim, geralmente assumimos que com alto retorno, tem alto risco. Como pode ser que o que se pensa como moedas de risco são agora menos voláteis que os chamados majores. Será que realmente faz sentido, por exemplo, que a Lira turca é menos volátil do que a Libra britânica.
Sem explorar esse par específico em detalhes, em uma palavra, a resposta é sim. Em 2018, o crescimento do mercado emergente deverá ser maior do que no mundo industrializado. A inflação é relativamente estável, e os níveis da dívida são comparativamente baixos. Enquanto isso, todas as moedas do G4 (Dólar, Euro, Iene Japonês e Libra Esterlina) estão atormentadas pela possibilidade de recessões de Double-Dip e crises de dívida de seriedade variável. Em resumo, os países em desenvolvimento reduziram a sua dívida externa para 26% do PIB no ano passado, de 41% em 1999, enquanto a dívida dos países avançados pode subir para 106,7% do PIB este ano, de 78,2% em 2007. "# 8221; Fale sobre o título em direções opostas!
Os investidores estão tomando conhecimento. Embora o índice JP Morgan Emerging Market Bond (EMBI +) esteja agora a aumentar a uma taxa anualizada de 22% (o que implica um declínio na rentabilidade das obrigações de mercado emergente), as taxas de dívida comparável da UE e dos EUA estão aumentando. Na semana passada, a taxa de tesouraria de 10 anos superou 4% pela primeira vez em 18 meses (embora tenha recuado). Enquanto isso, os swaps de inadimplência de crédito são preços em uma chance de 0,4% de inadimplência nos EUA. Concedido, isso ainda é infinitesimal, mas qualquer coisa acima de 0% teria sido ridicularizada como ridícula apenas alguns anos atrás. Este ano, os EUA estão projetados para gastar mais no serviço de sua dívida do que qualquer outro país, exceto para o Reino Unido. O déficit projetado de US $ 1,6 Trilhão para 2018 certamente não ajudou as coisas.
Assim, os mercados emergentes são projetados para atrair US $ 722 bilhões em investimentos no exterior este ano, 66% a mais do que em 2009 e # 8230. Os fundos de títulos de países em desenvolvimento atraíram US $ 7 bilhões este ano, empurrando ativos sob administração para um recorde de US $ 74,7 bilhões. & # 8221; Muitos gerentes de portfólio estão apostando que esta será uma tendência de longo prazo: & # 8220; O rali em mercados emergentes ainda não começou. & # 8221;
Quais são as implicações do forex? Pela primeira vez, pudemos ver as moedas do G4 começar a negociar como um bloco. [Anteriormente, era o dólar dos EUA versus o resto. A introdução do euro há dez anos apenas reforçou essa tendência, o que é irônico, considerando que a UE também se tornou uma moeda de estabelecimento. Mas, se você olhar para os gráficos, o par Dólar / Euro raramente trocou de lado, e os comerciantes usaram isso como base para fazer reivindicações mais amplas sobre os mercados]. Agora, parece que isso poderia finalmente mudar: "As grandes tendências serão em moedas não-G4 contra o G4, como dólar / Noruega ou euro / Aussie, e em moedas de mercado emergentes." # 8221;
Esqueça da Grécia: e os EUA, o Japão e o Reino Unido?
Esqueça da Grécia: e os EUA, o Japão e o Reino Unido? Quase 75% da negociação nos mercados cambiais envolve alguma combinação do dólar americano, do euro, do iene japonês e da libra britânica. Esse valor sobe para mais de 95% quando você inclui negociação em que pelo menos uma das moedas (ao contrário de ambas) é uma das mencionadas. Em suma, essas quatro moedas são, de longe, as mais importantes nos mercados de forex, e a maioria dos padrões / narrativas nos mercados de divisas tendem a envolvê-los.
Este fenômeno tem especial relevância no domínio da dívida soberana. Enquanto alguns investidores não adorariam mais do que transferir seu capital das quatro moedas de dívida acima, não há oferta suficiente de moedas alternativas para absorver a saída. O franco suíço, o dólar australiano e o dólar canadense (# 5, 6 e 7 na lista das moedas mais negociadas), por exemplo, aumentaram ao longo do último ano, já que os investidores buscaram alternativas estáveis ​​e líquidas para o que pode seja apelidado de moedas do Big-4. Embora essas moedas ainda tenham espaço para apreciação, elas podem continuar a crescer para sempre. Para o melhor ou o pior, então, a comparação mais útil quando se trata de dívida soberana não é entre o Big-4 e tudo mais (também conhecido como as principais moedas e as moedas dos mercados emergentes), mas sim entre os próprios Big-4.
Perdoe-me por esta longa introdução, mas acho que é importante entender a utilidade de comparar o Japão com os EUA com a UE com o Reino Unido quando todas essas economias têm problemas fiscais terríveis e por que podemos # 8217 , apenas compare-os a economias fiscalmente sólidas. Com isso dito, comece a comparação!
A maior parte das consequências da crise da dívida soberana afetou a UE e o euro. Isto é por uma boa razão, uma vez que o ponto focal da crise é um membro do euro (Grécia) e vários outros países da zona do euro estão na periferia. Eu me dirigi à UE em um post anterior (crise da dívida da UE: a percepção é a realidade), então eu acho que faz sentido se concentrar nos outros aqui.
Em termos de sustentabilidade da dívida, o Reino Unido não está muito atrás da Grécia. & # 8220; A inundação da dívida britânica é susceptível de gerar condições inflacionárias e uma moeda depreciadora, & # 8217; reduzindo o retorno sobre títulos. & # 8216; Se essa visão se tornar consenso, então, em algum momento, o Reino Unido pode deixar de atingir a velocidade de escape da sua armadilha de dívidas, & # 8217; & # 8221; explicou um analista. Com altos déficits orçamentais projetados para pelo menos nos próximos cinco anos, o Banco da Inglaterra não mais comprando títulos do Reino Unido e a possibilidade de que as próximas eleições possam produzir impasse político, a posição fiscal do Reino Unido só pode deteriorar-se. No lado positivo, o vencimento médio para títulos do Reino Unido é de 13,7 anos, o dobro da média da OCDE, o que significa que poderia ser mais de uma década, antes que a Grã-Bretanha realmente comece a sentir o aperto.
O Japão talvez não seja tão sortudo. Sua dívida líquida já ultrapassa 100% do PIB e sua dívida bruta é de aproximadamente 200% do PIB; ambos são os mais altos da OCDE. Enquanto isso, a maturidade média de sua dívida é de apenas cinco anos, então não há muito tempo para agir. De acordo com analistas, a crise provavelmente assumirá a seguinte forma: & # 8220; Um aumento nos rendimentos levaria a uma combinação de contração fiscal extrema, através de aumentos de impostos e cortes de bem-estar, e também para expansão ainda mais monetária, talvez menos independência do banco central e # 8216; presumivelmente uma taxa de câmbio muito fraca. & # 8217; & # 8221; No caso do Japão, o fator atenuante é que 90% da dívida pública é mantida internamente. Portanto, o Japão não é vulnerável aos caprichos dos credores estrangeiros, e um padrão absoluto é improvável.
Então, há os EUA. Os déficits orçamentários do Trilhão de Dólares e as dívidas nacionais de trilhões de dólares e as obrigações de direito são os mais altos do mundo em termos nominais. Por outro lado, o governo dos EUA não encontrou nenhuma dificuldade no financiamento de seus gastos. A oposição política é feroz, mas os investidores se alinharam para comprar títulos do Tesouro e registrar baixos rendimentos. Isso provavelmente mudará à medida que o Fed reduzir suas compras, e a recuperação econômica dá origem a taxas de juros mais elevadas. Os analistas esperam que os custos de empréstimos (ou seja, os rendimentos do Tesouro) possam subir mais de 1,5% no final de 2018.
Do ponto de vista dos mercados, é impossível dizer quais os problemas fiscais da economia são os mais sérios, uma vez que os rendimentos da dívida soberana diminuíram ao longo dos últimos 20 anos. Um professor de finanças explica essa tendência da seguinte forma: fatores comportamentais mantêm muitos comerciantes de títulos e investidores reconhecendo a realidade da situação & # 8230; uma vez que não há um ponto de crise bem definido. & # 8221; Em outras palavras, a crise na Grécia é apenas uma prova. O real poderia vir dentro de alguns anos, e envolver uma economia muito maior. Nesse ponto, os comerciantes de divisas terão de decidir para quem voltar.
Taxa da tarifa do Fed ainda distante.
Os analistas e os observadores do Fed tem especulado durante quase meio ano sobre a possibilidade de uma subida da Taxa Federal de Fundos (FFR). Com cada prognóstico de uma subida de taxas, ocorre uma enxurrada de atividade de mercado, seguida de um refluxo invariável, já que os investidores aceitam que o Fed fará o FFR em 0% até pelo menos sua próxima reunião.
Muitos comerciantes (forex e outros) olham para os futuros da taxa de juros para obter orientação sobre quando o Fed irá finalmente caminhar. Se você acreditar & # 8221; que os preços de futuros são um preditor exato, então existe atualmente uma chance de 68% de que o FFR aumentará em 25 pontos base na reunião de dezembro de Fed. Até então, os mercados estão classificando preços em uma probabilidade muito baixa de qualquer aumento de taxas. Além disso, há muito poucas razões para colocar estoque em futuros de taxa de juros a mais de alguns meses de distância, porque a incerteza é alta eo volume é baixo. Pense nisso: se você tivesse analisado os futuros da taxa de juros no verão de 2008 (logo antes do início da crise de crédito), você estaria antecipando um aperto contínuo da política monetária, e não o afrouxamento torrencial que se seguiu ao colapso de Irmãos Lehman.
De fato, os pesquisadores do Banco da Reserva Federal de Cleveland disseram que, em 2006, o mercado de futuros de fundos alimentares não é muito bom em prever a taxa real de movimentos mais de alguns meses para o futuro, mesmo quando o Fed está ajustando ativamente seu destino. & # 8221; Sendo assim, não há nenhum ponto no controle de contratos de futuros que amadureçam após maio de 2018. Com relação a contratos que amadurecem nos próximos dois meses, bem, você não precisa monitorar preços de futuros para saiba que há muito pouca probabilidade de o Fed aumentar as taxas em breve.
Mas não tome a minha palavra para isso. O que os membros da Junta de Governadores do Fed têm a dizer sobre o assunto? Em seu testemunho semestral perante a Câmara dos Deputados na semana passada, o presidente Ben Bernanke disse que # 8221; & # 8216; a economia continua a exigir o apoio de políticas monetárias acomodatórias. & # 8217; E em resposta a perguntas, ele reafirmou que o alto nível de desemprego e a baixa taxa de inflação continuarão a justificar taxas muito baixas # 8216 por um período prolongado. & # 8217; & # 8221;
Janet Yellen, presidente do Fed de São Francisco, também insistiu em que a economia dos EUA ainda precisa de "# 8217; taxas. & # 8221; Esse Yellen é a linguagem do período prolongado do Fed personificado & # 8221; Vale a pena notar, uma vez que ela tem a reputação de ser a escolha do presidente Obama para servir como vice-presidente do Fed. Se não for suficiente, Bernanke é uma pomba monetária no extremo, agora ele pode ser acompanhado por Yellen, que certamente irá ecoar sua crença na necessidade de taxas baixas.
Sem fazer um novo papel dos jogadores de energia do Fed, basta dizer que baixas taxas estão nas cartas para um futuro próximo. Provavelmente você está se perguntando: quem se importa ?! Com tanto mais se concentrar nos mercados de moeda nos dias de hoje (ou seja, a crise fiscal ainda em evolução da UE), vale a pena prestar muita atenção ao Fed? A resposta é sim . Embora as taxas de juros de longo prazo (ou seja, as que são mais afetadas pelas preocupações da dívida soberana) pesam bastante em todos os preços dos ativos, as moedas são impulsionadas principalmente por diferenciais de taxa de juros de curto prazo.
Os fenômenos relacionados do Comércio de Carros, do Efeito Fisher, da Paridade de Poder de Compra, etc., são todos baseados em taxas de juros de curto prazo. Se o Fed deixa as taxas baixas durante um período prolongado conforme promete, e / ou outros Bancos Centrais (Austrália, Canadá, Brasil) empurrão as suas respectivas taxas mais altas, provavelmente ganhou um bom acordo para o Dólar. Isso ajuda que o Dólar ainda esteja à frente da curva, em comparação com os outros maiores (EU, Reino Unido, Japão), tanto monetariamente quanto fiscalmente, o que significa que o dólar deve se adequar às suas moedas. Quando você coloca o dólar frente a frente contra algumas das moedas mais pequenas, sua posição é muito menos favorável, devido em grande parte ao Fed.
Nova & # 8220; Partição & # 8221; em mercados de Forex.
Em outubro, escrevi sobre uma & # 8220; separação & # 8221; que teve lugar nos mercados de câmbio entre o & # 8220; sick & # 8221; moedas e o & # 8220; saudável & # 8221; moedas. Na época, eu argumentava que a primeira categoria era composta principalmente do dólar e da libra, com a maioria das outras moedas saudáveis ​​em comparação. Enquanto eu continuar de acordo com esse paradigma, eu gostaria de revisá-lo um pouco. Especificamente, gostaria de adicionar o Euro e o iene a esta lista.
A recente explosão em torno do downgrade da dívida da Grécia e a posterior explosão no preço dos swaps de inadimplência de crédito (que asseguram contra incumprimento), tem evidenciado os problemas fiscais de muitos membros da UE Estados Unidos, incluindo Espanha, Itália, Portugal, Irlanda e outros. A situação no Japão, entretanto, tem sido muito mais gradual, embora igualmente perigosa: em 1990, a carga de dívida nacional total do Japão foi de 390% do PIB. Agora é 460%. No ínterim, o país sofreu crescimento sub-par e recessões de rotina. & # 8221;
Os problemas fiscais dos governos dos EUA e do Reino Unido, bem como as dívidas de seus cidadãos e empresas têm sido famosas. Por essa razão, quando o paradigma doente / saudável foi proposto pela primeira vez, eles eram os dois candidatos mais óbvios. Tendo realizado algumas análises adicionais, é óbvio que os mesmos problemas afetam a UE e o Japão. Dado que suas economias também estão em forma fraca, não tem realmente sentido agrupar-se com as moedas saudáveis. O Canadá (e o Loonie, por extensão) também está ficando doente, com sua crescente dívida nacional e déficits orçamentários recorde. A única razão pela qual está sendo poupada da lista é devido à sua riqueza em recursos naturais; em outras palavras, tem algo tangível que pode usar para pagar suas dívidas.
Entre os chamados majores, então, apenas o Franco suiço, o Loonie canadense, o Dólar australiano e o Dólar da Nova Zelândia recebem contas limpas de saúde. Um re-casting do paradigma, então, colocaria os super-majores (Euro, Yen, Pound e Dollar para mais de 75% de toda a atividade cambial) de um lado e praticamente todas as outras moedas do outro. Dado que os rácios da dívida nacional e os diferenciais das taxas de juros divergem através do mesmo limite, não é difícil conjurar uma base para essa partição. O FMI prevê que a dívida pública bruta entre as economias avançadas continuará a aumentar até 2018, atingindo 114% do PIB, em comparação com apenas 35% para os países em desenvolvimento. & # 8221; Adiciona outro analista: & # 8220; Se você olhar para as moedas como um proxy para o crescimento, então você pode antecipar que as moedas dos mercados emergentes serão apreciáveis ​​em relação ao dólar. & # 8221;
Há também uma correção que está ocorrendo dentro do grupo de moedas doente. Os investidores perceberam tardiamente que uma venda de dólares não tem sentido em relação ao euro e ao ienes, cujas situações econômicas e fiscais dificilmente podem ser caracterizadas como saudáveis. & # 8220; Contra as principais empresas, estamos muito perto do fim, se ainda não chegarmos ao fim de um mercado ostentoso no dólar; # 8221; afirmou um analista. Dado que a morte do Dólar tinha sido, no entanto, tomada como certa, esta reconsideração não é natural. A volatilidade aumentou para um máximo de 3 meses, e os investidores estão respondendo movendo fundos de volta para os EUA. Entre os maiores, então, parece que o dólar ainda é o # 8220; o menos pior e # 8221; moeda.
Medos de dívida soberana Padrão Digite o Forex Fray.
Como se os comerciantes de forex não tivessem o suficiente para se preocupar com esses dias, agora há uma nova preocupação - a de inadimplência da dívida soberana. Nos últimos meses, testemunharam uma série de episódios menores, todos os quais pintaram uma imagem de coesão assustadora sobre o estado das finanças soberanas e a capacidade dos países para continuar a financiar e atender suas dívidas. À medida que a recessão econômica se move para a recuperação (ou, pelo menos, afasta-se permanentemente da perspectiva de depressão), os mercados provavelmente voltarão seu olhar para o longo prazo, com esta questão em grande número.
É difícil saber por onde começar, já que as pessoas estão falando sobre os déficits orçamentários perenes dos EUA por muitos anos. Como resultado da desaceleração econômica (programas de estímulo e queda das receitas fiscais), esses déficits orçamentários assumiram proporções verdadeiramente impressionantes. O déficit de 2009 chegou em um recorde de US $ 1,4 Trilhão eo déficit no ano fiscal de 2018 é próximo de US $ 300 bilhões.
Os EUA, é claro, estão longe de ser solitários, com praticamente todas as nações (industrializadas e em desenvolvimento) que operam no vermelho. Canadá, Grã-Bretanha, Japão e # 8230; mesmo China & # 8211; conhecido por sua prudência fiscal & # 8211; estão estabelecendo registros com seus déficits orçamentários.
Como resultado, o & # 8220; Moody & # 8217; s & # 8230; sugeriu que os países & # 8217; as classificações de triplo-A podem enfrentar baixas baixas nos próximos anos. & # 8221; A dívida soberana da Grécia já foi rebaixada, desde AAA até BBB +, enquanto a Espanha recebeu um aviso. Dubai está em padrão técnico, mas esta é uma notícia antiga.
Não é como se nada disso fosse surpreendente, ou mesmo novo. A Grécia, por exemplo, estava executando 10% de déficits orçamentários durante o auge da bolha de crédito. Com o estourar da bolha, no entanto, os problemas fiscais soberanos foram ambos expostos e exacerbados. Se alguma vez houve um tempo em que os governos nacionais poderiam ter suas casas fiscais em ordem, não é isso.
Neste ponto, os mercados parecem se resignar a déficits de céu para o futuro imediato, e agora começaram a avaliar as implicações ao invés de tentar incentivar os governos a endireitarem. Embora os déficits orçamentários e a dívida nacional dos EUA sejam os mais elevados em termos nominais, os títulos do Tesouro ainda permanecem como portadores de padrões nos mercados globais de capitais. Provar esse ponto é que as novas questões do Tesouro são repetidas em excesso de inscrição, apesar das taxas inferiores. & # 8220; Por cada $ 1 de dívida vendida pelo Tesouro este ano, os investidores efetuaram lances por US $ 2,59, ante $ 2,9 neste ponto em 2008. & # 8221; Mais importante ainda, o maior credor & # 8211; China & # 8211; é a demanda principal. Concedido, os custos de segurar a dívida dos EUA (via swaps de inadimplência de crédito) estão aumentando, mas os investidores geralmente permanecem cautelosamente otimistas sobre as finanças dos EUA.
A história do outro lado do Atlântico não é tão animada. Os investidores responderam ao downgrade da classificação de crédito da Grécia, ao aumentar o rendimento de sua dívida em 50 pontos base, aumentando o spread para 2,5% em relação aos títulos soberanos alemães comparáveis. A Irlanda, enquanto isso, está projetando um déficit orçamentário de 13,2% este ano, e a Áustria está recebendo escrutínio para seus bancos e # 8217; Práticas de empréstimos de risco na Europa Oriental. "A questão para a Europa agora é quanto mais solventes são países como a Itália, Portugal e Espanha". Pode ser que essas sejam as regiões onde o próximo sapatos financeiros vai cair? # 8221; Perguntou um analista.
A questão mais importante é o que aconteceria em caso de incumprimento, ou mesmo um aumento nas taxas de rendimento de um membro da UE. Tecnicamente, o tratado por trás da União Monetária Européia & # 8220; contém um & # 8216; sem resgate; # 8217; cláusula que proíbe um país assumir as dívidas de outro. & # 8221; Parece difícil de acreditar & # 8211; de onde eu estou sentado pelo menos & # 8211; que outros países se sentariam de forma ociosa se um membro começasse a se mudar inexoravelmente para a falência. Os investidores certamente não são cegos à noção de uma garantia implícita, que ajuda os fracos à custa do todo. Isso poderia explicar por que os títulos gregos e espanhóis permanecem relativamente dinâmicos, enquanto o euro sofreu em sessões recentes.
Então, existe o Reino Unido. De todas as maiores economias do mundo, o Reino Unido está indiscutivelmente na posição financeira mais precária, especialmente em relação ao seu tamanho. Como um comentarista lamentou, & # 8220; De fato, o custo do nosso empréstimo do governo [do Reino Unido] - conforme medido pela taxa de juros - está aumentando tão rapidamente que, dentro de um mês, poderia ser maior que a Itália & # 8217; s. & # 8221 ; Ele continua a discutir como inflacionar a dívida seria inútil, dada a sofisticação dos investidores e o fato de que os passivos do governo estão indexados à inflação e, portanto, compensariam os ganhos decorrentes da desvalorização da dívida. Ele conclui: "A solução para a crise fiscal de hoje é a mesma coisa que sempre foi: cortar gastos, reduzir o déficit e aprender a viver dentro de nossos meios." # 8221; Com base na história moderna, isso parece bastante improvável. A Grã-Bretanha, então, pode se tornar o primeiro país industrializado a inadimplência em sua dívida? Mercados de Forex: tome nota.
G7 Ditches Currency Communique.
As reuniões semestrais do & # 8220; G & # 8221; países & # 8211; se o G7, G8, G20, etc. & # 8211; são sempre monitorados de perto por analistas de moeda. Especial atenção é dada ao comunicado oficial, que geralmente inclui uma avaliação das taxas de câmbio atuais.
O comunicado raramente é tão direto para indicar se, quando e onde os Gs vão intervir. No entanto, muitas vezes é cheio de insinuações, e os analistas geralmente passam dias analisando sua retórica para indícios. Durante este período, não é incomum para os mercados cambiais testemunhar o aumento da volatilidade, já que os investidores tentam chegar a um consenso sobre o que esperar nos meses que seguem a reunião. Isso ocorre porque, ao contrário dos Bancos Centrais, que muitas vezes enfrentam dificuldades em tentar unilateralmente influenciar suas moedas, o G7 geralmente consegue alcançar seu objetivo desejado: um estudo do economista do ECB, Marcel Fratzcher, no ano passado, descobriu que o G7 teve sucesso em se mudar No prazo de um ano, as moedas em 80 por cento das 29 ocasiões tentaram fazê-lo desde 1975. # 8221;
No entanto, a reunião atual, que está sendo realizada em Instanbul, Turquia, pode romper com essa tradição. Não é claro exatamente o que motivou a decisão (potencial) de não liberar um comunicado, que tem sido uma importante ferramenta política nas últimas três décadas. Perhaps, policymakers have realized that their are other, better forums to discuss currency issues, namely the G20, which met last week in Pittsburgh, USA.
The timing of the decision is somewhat odd, given that exchange rate and other economic imbalances are proliferating. In fact, in press conferences held before and after the official G7 meetings, policymakers and Central Bankers have been forthcoming about such imbalances. Jim Flaherty, Finance Minister of Canada, sounded off on the RMB, which has stalled in its appreciation for over a year: “They (China) have a position that they are relaxing their currency, relaxing the restrictions on their currency gradually over time,” ele disse. Meanwhile, ECB Governor Jean-Claude Trichet voiced concerns about the Dollar, which has slide 15% against the Euro so far this year.
Ironically given the G7’s refusal to act, there is actually a strong conensus that the Dollar’s slide is generally bad for the global economy, especially in the context of the nascent recovery. A cheaper Dollar not only affects the export competitiveness of countries in Asia, but is also partially responsible for surging commodity prices. There is also a general belief that volatile (perhaps unstable is a better word) exchange rates are not conducive to economic and financial stability.
At this point, it doesn’t seem likely that either the G7 or the G20 will take the extreme step of intervening on behalf of the Dollar, which remains well below the record lows of 2008. If the Buck continues to slide, however, especially to the point where its role as global reserve currency is in jeopardy…well…that is a different story, and fodder for next year’s meetings, which will be held in Canada. Then again, it may be taken up by the G4, a still-hypothetical group which would consist of the US, China, Japan, and a representative from the EU. It is alos the intended subject of my next post…stay tuned!
Forex Volume is Down – What are the Implications?
According to a recent report by the Reserve Bank of Australia (RBA), forex volume is down in nearly every major category. “However, turnover declined by over 20 per cent between October 2008 and April 2009 to US$2.5 trillion, to be at its lowest level in over two years, a move reflected in all six markets indicating global, rather than location-specific, causes. The largest markets – the United Kingdom and the United States – experienced the sharpest percentage falls.”
The report was based on a survey of the world’s six largest forex trading hubs – US, UK, Japan, Canada, Singapore, and Australia – and produced a few interesting revelations. The first is that forex volume peaked well after other capital markets. This can probably be attributed to the notion that there is never a bear market in forex. In other words, after stocks and bonds began to collapse in the summer of 2008, investors embarked on a mission, unprecedented in its speed, to move capital from risky countries to safe-haven countries. This switch, by definition, required the forex markets to facilitate.
This point is further illustrated by the fact that, “the decline in turnover of spot and forwards occurred somewhat later than that in foreign exchange swaps and derivatives….Spot turnover reported in October 2008 was likely to have been supported by large cross-border capital flows as investors sought to reduce risk by repatriating foreign investments. In addition, the high frequency and impact of news at the height of the crisis would have generated the need for investors to frequently adjust their positions.”
The final revelation is that the change in forex volume was not always commensurate with changes in trade volume. A general relationship between trade and forex turnover has been observed, although speculators ensure that currency is exchanged much more frequently than actual goods and services. The two currency pairs registering the greatest unbalance are the CHF/USD and CAD/USD. Forex volume for the former fell much more sharply than trade, while the opposite is true of the latter. One can only speculate as to why this is the case. As for the CHF/USD, forex volume probably suffered disproportionately more because both the Swiss Franc and US Dollar were perceived as safe haven currencies, in which case it would be relatively less useful to exchange them for each other. In the case of the CAD/USD, meanwhile, it makes sense to view the imbalance in terms of the spectacular decline in trade, which was largely a product of declining commodity prices.
It’s impossible to predict whether forex volume will remain depressed. Given the efforts underway to increase regulation and curtail leverage, I don’t personally expect volume to recover for a while. As for the implications, the less might be to stick to the majors. If volume is declining, it will probably affect emerging market currencies most. Lower liquidity might translate into higher volatility. However, it’s worth pointing out that volatility has been declining ever since it skyrocketed after the collapse of Lehman Brothers last fall. In that case, it might be that investors are behaving more prudently with less funds to trade with.
New Zealand Dollar Rise Threatens Economic Recovery.
Having risen nearly 30% against the US Dollar since March, the New Zealand Dollar (NZD or Kiwi) is now close to a 9 1/2 month high. While still far from the record highs of 2008, the currency is already erased a large portion of the losses it racked up since the credit crisis gave way to economic recession.
As part of last Friday’s coverage of the Japanese Yen, we included a chart which compared the performance of the AUD/JPY cross to the S&P 500. Even without calculating the correlation coefficient, a cursory review of the chart revealed an uncanny relationship! Unsurprisingly, it turns out the same relationship also applies to the New Zealand Dollar, whose recent performance closely mirrors US equities.
In other words, the interplay between risk appetite and risk aversion continues to dominate the forex markets, as traders move to calibrate the split of funds between so-called safe haven currencies and the riskier alternatives, among which the New Zealand Dollar is certainly counted. Much of the rally in the Kiwi, then, represents a correction, as investors acknowledge that the near 50% slide from-peak-to-trough was an overreaction.
Going forward, however, the Kiwi will have to rest on its own feet, as new themes move to the fore of investors’ minds. Specifically, they will begin to look more closely at the New Zealand economy, and demand evidence of a recovery. “Reserve Bank of New Zealand Governor Alan Bollard told a business audience the world has ‘avoided a repeat of the Great Depression. Now, we and the world, appear to be on our way to recovery. New Zealand looks likely to start recovering ahead of the pack.’ & # 8221;
At the same time, the most recent economic data showed an economy in freefall, as “New Zealand’s economy shrank for a fifth straight quarter…The economy contracted 2.7 per cent in the January-March quarter.” While forecasts vary, GDP is expected to fall by at least 2.1% in 2009, with a modest pickup expected in 2018. Investors are betting that the recovery will be driven by rising demand for commodities, which will help to buoy New Zealand exports. Once again, this conflicts with the data, which shows an annualized trade deficit of $3 Billion. Despite a fall in imports, the country is still importing more than its exporting. This could be a product of the stronger currency, which all stakeholders agree is not conducive to economic growth. In the end, the economy’s best chance for recovery lies in a resumption of debt-induced consumption and residential construction, the very forces which caused the current downturn. Says Mr. Bollard, “Reliance on past experience of strong house price inflation and easy credit will be untenable.”
Given the uncertain prospects for growth, combined with moderating price inflation, the RBNZ can be expected to hold interest rates at current levels for the near-term. “Bollard will leave the benchmark interest rate unchanged at a record low 2.5 percent on July 30, according to all 10 economists surveyed by Bloomberg.” Based on swap rates, the markets feel similarly, and are pricing a mere 25 basis point hike over the next twelve months. With such a dubious prognosis, one has to wonder whether the Kiwi’s rally is really sustainable.
SNB Intervenes on Behalf of Franc.
Back on March 12, the Swiss National Bank issued a stern promise that it would actively seek to hold down the value of the Swiss Franc (CHF) as a means of forestalling deflation. The currency immediately plummeted 5%, as traders made a quick determination that the SNB threats were made in earnest. Over the months that followed, however, investors became complacent and the Franc slowly crept back up.
That was until this week, when the SNB sprung into action, buying Euros on the open market. “The franc slid as much as 2.4 percent versus the euro and 3.3 percent against the dollar, the biggest declines since…March 12.” It’s not clear why the SNB suddenly intervened after months of inaction. The Central Bank didn’t hold a press conference to “celebrate” its intervention, and the only indication was a vague declaration last week that “policy makers will act to curb any ‘irrational appreciation’ of the franc.”
Analysts have speculated that the SNB is (arbitrarily) targeting the exchange rate of $1.50 Francs/Euro, which is plausible given that the intervention occurred very close to that level: “They’re trying to put a line in the sand at 1.50. There’s a big debate as to whether they will continue doing this, and for how long they will remain successful.” After all, the idea of intervention is more effective than intervention itself. The SNB can only buying so many Euros; the real value is in the threat to continue buying, which keeps investors from building up speculative positions.
While the SNB has been criticized as “protectionist” for its actions, its premise for intervention is well-grounded. According to the OECD, “Switzerland should keep interest rates close to zero well into 2018 and mull more fiscal stimulus to fight a deep recession and the risk of deflation.” Modest deflation has already set in, facilitated by a collapse in aggregate demand. Varying forecasts are calling for an economic contraction in 2009 equal to -2.5%-3%, and even a modest contraction to follow in 2018. Q1 GDP growth was negative and the consensus is that Q2 will prove to have been more of the same. If this trend continues, 2009 will be the worst year economically in over 30 years. Still, economic indicators suggest the bottom is soon approaching, and the overall picture is consistent with the rest of Europe.
The real concern is that other Central Banks will imitate the Swiss approach. “In the past couple of weeks we have had five or six central banks, including the Bank of Canada and the Bank of England, talking down their currencies. Like Switzerland, they are fearful that currency appreciation could offset the stimulus to the economy,” noted one analyst. Monetary and economic conditions remain abysmal worldwide, and most banks have already exhausted the tools available to them. Interest rates are universally close to zero; fiscal “stimuli” will push the OECD debt/GDP ratio past 100% in 2009; quantitative easing has given rise to wholesale money printing. Currency devaluation may be the only option left.
Swiss National Bank Renews Threat of Intervention.
When the Swiss National Bank (SNB) announced oln March 12 that it would intervene in forex markets for the first time since 1994, the Franc immediately plummeted up to 5% against select currencies. Since then, the currency has largely clawed back some of its losses, prompting talk of round two: “Speculation about an imminent intervention in the foreign-exchange markets was rife…after the euro fell to CHF1.5031, the lowest level seen since March 12 when the SNB began selling Swiss francs against euros.”
It was unclear whether the Central Bank had chosen a magic threshold, such that a rise by the Franc above which would trigger a sale of Francs in the open market. Earlier in the week, one analyst asserted, “With the euro/franc exchange rate almost at pre-intervention levels – the euro jumped to a level above CHF1.52 after the SNB intervention in March from CHF1.4843 before the announcement – the stage is set for the SNB to either put up or shut up.”
Sure enough, both the Chairman of the SNB as well as a board member both announced yesterday that the campaign to hold down the the Franc is still in effect, and will soon enter a new phase. Thus far, the Bank has relied on various forms of quantitative easing to deflate its currency, both through direct currency transactions and purchases of bonds. The goal of such quantitative easing is only proximately to deflate the Franc; the ultimate goal is to ward off deflation. Given that the Bank had already lowered its benchmark interest rate close to zero, manipulating its currency was/is one of its few remaining options. “As long as the environment does not improve and as long as deflation risks are visible in our monetary policy concept, we will stick to this insurance strategy resolutely,” said Chairman Jean-Pierre Roth.
As the economic recession takes hold, the Swiss economy is forecast to contract 3% in 2009, but to grow in 2018. Consumer sentiment has fallen to the lowest level since 2003. Inflation, meanwhile is projected at -0.5%; deflation, in other words. Still, Switzerland maintains that its motivation is not to boost the economy, but only to increase monetary stability. National Bank governing board member Thomas Jordan “reiterated the interventions have nothing to do with a beggar-thy-neighbor policy, a strategy to weaken a country’s currency to improve the situation for domestic exporters.”
Given that forex intervention is usually doomed to failure, the SNB must rely on a combination of luck and improved fundamentals to keep the Franc down. Thus, when the next round of intervention was announced yesterday, the Franc fell by a modest .75% against the Euro, as investors largely shrugged of the news. Fortunately, the initial pledge to intervene coincided with a pickup in investor sentiment, and decline in risk aversion. This has reduced demand for the Swiss Franc, which had previously been bid up as a so-called “safe haven” moeda. As long as the stock market rally continues, investors will stick to higher-yielding currencies and the Franc should be “safe.”
China’s Gold Holdings Surge 76% over Six Years.
Based on the title, you’re probably groaning: ‘Wait, I thought this was supposed to be a forex blog?” Bear with me, however, as this subject is extremely pertinent to forex.
Last week, it was revealed that China has been clandestinely adding to its gold reserves since 2003, to the extent that its holdings increased by 76%, to approximately 1,050 tons. The news initially sent a ripple through forex and commodities markets, which were overwhelmed by the figures involved. After analysts had a chance to gather some perspective, however, the markets relaxed. You see, although the increase seems tremendous in size, it is quite small in relative terms.
It is relatively small compared to other countries: “This places China fifth in the world, ahead of Switzerland’s 1040 tons but behind the U. S. ranked first with 8,133 tons, followed by Germany (3,412 tons), France (2,508 tons) and Italy (2,451 tons).”
It is relatively small given the six-year duration of accumulation: “I think as soon as people realized it’s not a year-on-year increase, or a quarter-on-quarter increase, people realized it should not have that big an impact.”
It is small relative to China’s mammoth $2 Trillion forex reserves: “As a proportion of foreign exchange reserves, which have risen five-fold over the same period, gold now stands at a tiny 1.6 percent, versus 1.7 percent in 2003.”
On some level, the development has at least some symbolic importance, as it demonstrates that it cannot be taken for granted that China will simply continue to plow its (dwindling) trade surplus into Dollar-denominated securities, or even currencies in general. This is underscored by the suspicious timing of the announcement; China essentially waited six years before revealing its buildup in gold, probably in order to coincide with the uproar surrounding the Dollar’s role as global reserve currency. In other words, even though China’s gold purchases in and of themselves don’t amount to much, the Central Bank of China is trying to send a message that it will defend itself against “the depreciation risk of some foreign currencies.”
The announcement also explains the recent buoyancy of gold prices. Historically, there existed an inverse correlation between gold and the Dollar. This correlation has all but broken down as a result of the credit crisis, and for the first time a strong Dollar has been accompanied by high gold prices. Part of the reason may be increased buying activity by Central Banks, including the Bank of China: “The physical market remained well-bid by an unknown buyer despite bullion prices spiking to levels that normally cooled demand…Purchases were made in Shanghai, traders said, in an effort to absorb domestic production and lessen the impact of bullion prices on global markets.”
Risk Aversion Returns to Forex as Hope from G20 Fades.
The period leading up to the G20 meeting was generally marked by optimism and hopefulness. One commentator urged his readers: “Don’t write off the London G20 meeting. It could lay the foundations for fundamental global change, impacting currencies, gold and bond markets.”
On some level, the meeting probably did fulfill expectations. After only a few hours of discussions, the G20 agreed to “stricter limits on hedge funds, executive pay, credit-rating companies and risk-taking by banks. The summit also committed more than $US1 trillion to boost the resources of the International Monetary Fund and provide emergency cash to help distressed countries.”
Investors rejoiced and the markets rallied, with the Dow rising above 8000 points and capping “the best four-week rally since the week ending May 12, 1933.” Bulls can now retort that the stock market bust of 1929 took four years to recover, while the recession of 2008-2009 required less than one year. Forex markets also reacted “positively” to the G20 summit, lifting the Dollar above the important psychological barrier of 100 Yen/USD, and causing emerging market currencies to rise across the board.
Monday, however marked a return to business as usual: “Post-G20 euphoria, which had helped to boost market confidence about a global recovery, proved short-lived as investors once again focused on the continued risks to the banking system.” It was probably only a matter of time before investors drilled beneath the surface of the impressive-sounding G20 rhetoric and large numbers, into the nuts and bolts of the summit’s policy prescriptions. [The chart below comes courtesy of the New York Times].
The summit also failed to meaningfully address concerns of the continued ole of the USD as the world’s de facto reserve currency. The expansion of the IMF synthetic currency program represents an important starting point, but at this point, it looks like China and the other supporters of an alternative system will have to wait for the next G20 meeting, to be held in September.
One commentator captured this frustration quite well: “The G20 Plan…tries very hard to preserve and perpetuate the existing US helmed global financial and economic order. An act of commission, on the one hand— buttressing the IMF— and an act of omission, on the other— remaining silent on the position of the US dollar— bear testimony to this.”
Swiss Bank Fulfills Promise of Forex Intervention, Franc Collapses.
Last week, the Forex Blog concluded a post on the Swiss Franc by suggesting that the Swiss National Bank (SNB) could artificially depress the value of its currency, which had “not just posted strong gains against the euro since late August but has gained 8% on a trade weighted basis.”
The very next day, the SNB followed its widely anticipated rate cut by announcing that it would indeed intervene in forex markets, “implementing” a decision to buy foreign currencies. The Swiss Franc immediately fell into a tailspin, falling 7 units against the Euro, and more than 3 against the Dollar. According to one trader, “the way this was communicated was intended at maximizing its shock value.” By the end of the week, the Franc had posted a record decline, as investors remained alert to the possibility of further invention.
This is the first ‘solo’ intervention since 1992 by the SNB, which has “followed a noninterventionist policy when it came to its currency, occasionally hinting at interventions but never following it up. It remained on the sidelines in September 2001 when the euro traded even lower than its present rate, at 1.44 Swiss francs.” It is also the first intervention by any Central Bank since 2003, when Japan intervened unsuccessfully to try to halt the rise of the Yen.
Evidently, the SNB felt justified in its decision not only because of a deteriorating economy, but more importantly because of monetary conditions. Inflation is now projected to dissappear by 2018, and may even “slow to the point where prices broadly fall.” Traders also speculated that the move was designed to relieve downward pressure on Eastern European economies, whose economic woes are being compounded by the fact that much of their debt is denominated in Swiss Francs.
It is doubtful that Switzerland will receive much sympathy from other countries, nearly all of whom have thus far refrained from forex intervention in spite of widespread economic contraction and the risk of deflation. In the words of one analyst, “It is troubling that a country with a current surplus larger than 10% of GDP feels compelled to depreciate its currency.”
The greater concern is that this could ignite some kind of “currency war,” where Central Banks around the world compete with each other to see who can most debase their respective currency. Traders are already speculating that the Bank of Japan could be next: “The BoJ should pay close attention to the SNB’s actions, given that both central banks have expressed a desire to see their currencies weaken.”
New Zealand Dollar (NZD) Benefits from “Deflation Trade”
2007 was the year of the carry trade. 2008 was the year of the safe haven trade. 2009, meanwhile, is shaping up to be the year of the deflation trade. In other words, traders have completed an about-face in their collective approach to forex, such that those currencies with the lowest rates are now favored, because they are perceived to best hedge against deflation.
The New Zealand Dollar illustrates this trend perfectly. For most of 2008, it collapsed as investors pulled money from risky, high-yielding currencies, in favor of a capital preservation strategy: accepting limited or zero return in exchange for security. Beginning at the tail-end of last year, however, it stabilized around the psychological level of .5 USD/NZD, failing to breach the important technical level of .4915.
While such technical factors undoubtedly have played a role in the reversal of fortune, the NZD has benefited by the aggressive interest rate cuts effected by the Bank of New Zealand, which today cut its benchmark rate yet again by 50 basis points, to 3%. While it’s too early to speculate whether the Central Bank will cut rates again at its next meeting, all signs point to further cuts. The economy is in a paltry state, having contracted for five consecutive quarters. Chinese demand for commodities is abating quickly, and the most recent numbers suggest it will continue to erode.
Based on investors’ current priorities, however, the most important indicator is the monetary situation, which appears under control. “The expectation that the RBNZ will be more moderate with cuts going ahead has provided support to the currency.” said…a currency strategist at Bank of New Zealand…“For a sustained bounce above 52 U. S. cents we’ll have to see an improvement in the global backdrop and evidence that equity markets have stopped falling and risk appetite is rebounding.”
Swiss Franc Rises on a Trade-weighted Basis, but Down against the Dollar.
Most of the “safe haven” talk in forex circles has focused on Japan and the US. Switzerland, meanwhile, has also attracted is fair share of risk-averse investors, who are piling into Franc-denominated assets, despite the deteriorating Swiss economic situation. In fact, February witnessed an inflow of $4 Billion, most of which was targeted towards gold and money-market funds. The Swiss Franc, as a result, has appreciated by 9% (on a trade-weighted basis), since the summer.
The Swiss National Bank (SNB), meanwhile, has cut interest rates by 225 basis points over the last six months. If it delivers on a unanimously-anticipated 25 basis point cut at its meeting tomorrow, its benchmark lending rate will stand at a paltry .25%. To the frustration of the SNB, the “deflation trade” is still in vogue, as traders have counter-intuitively taken to betting on the countries and currencies that offer the lowest interest rates. From an economic standpoint, this trend is eroding the effectiveness of an easy monetary policy, such that the SNB has been forced to consider less conventional approaches.
This would probably take the form of quantitative easing, in the same vein as that which the US and UK are currently pursuing. Under such a policy, the SNB would buy credit instruments on the open market, and pay for them by printing money. This would have the dual effect of devaluing the Franc and easing liquidity problems in Swiss securities markets. While normally a country in Switzerland’s position (especially one whose banks have recently come under fire for secret bank accounts would take flak for such a policy, Swiss (economic) neutrality largely eliminates this burden. Another alternative, which has been proposed by the heir-apparent for SNB chief, is to create a ceiling on the value of the Franc.
Either way, a lower Franc looks like a real possibility. Says one analyst, “Switzerland is likely to…cut interest rates and intervened [sic] verbally to weaken the Swiss franc, threatening unsterilised intervention. If this does not work, and we are sceptical that it will, actual intervention may be required and we suspect this will have some impact. The bottom line is that the franc looks vulnerable.”
The reversal of Interest Rate Parity.
Convention forex wisdom, as well as the "immutable" laws of economics, have long held that higher interest rates correspond with currency appreciation. This has been especially true in recent years, as risk-hungry investors used low-yielding currencies to fund carry trades, the proceeds of which were invested in higher-yielding alternatives. In the context of the credit crisis, however, this logic has been turned on its head, as the countries with the lowest interest rates have seen their currencies outperform. Emerging market economies that have turned bearish on inflation have likewise been rewarded with strong currencies, despite a potential imbalance in the risk/reward profile. This phenomenon suggests that investors are primarily concerned with deflation, and are parking their money in the countries they believe can best preserve their capital, even if the real rate of return is negative. One analyst argues this could spur further interest in gold, reports SeekingAlpha:
If it [the Euro] also joins the zero interest band-wagon then one may wonder what’s left for the currency markets to play with? Is this is a precursor to a crisis brewing here? Does gold get a further leg up – it’s a zero yield currency anyway!
Swiss Franc in Spotlight.
The Swiss Franc is in the same boat as the US Dollar and Japanese Yen, benefiting from an increase in risk aversion and an unwinding of carry trade positions. In other words, the currency rising on the back of the sound monetary policy of the National Bank of Switzerland, with its low rate of inflation and proportionately low interest rate. Despite the fact that the Swiss economy is poised to contract in 2009, its economy is in better shape than its rivals, and its current account balance is still in surplus. As a result, the consensus among analysts is that investors will continue to flock to the Franc, as Switzerland is sill perceived as a relatively low-risk place to invest. Especially compared to the Euro, which has risen against the Dollar of late, the Swiss Franc remains undervalued. Bloomberg News reports:
Investors are drawn to the franc in times of international tension and economic upheaval because of the country’s history of neutrality and political stability.
Krone/Krona Poised to Rally.
Even the most diligent forex traders would probably have difficulty distinguishing the Swedish Krona from the Norwegian Krone. Given current market conditions, such a distinction may no longer be necessary. Despite important differences in the structure of their respective economies, both currencies have moved in lockstep and fallen drastically, as a result of investor risk aversion associated with the credit crisis. The Norwegian Krona has been singled out especially due to the decline in the price of its most important export: oil. Despite sluggish growth, however, both Swe den and Norway expect to report large current account surpluses in 2009. In addition, inflation in both countries is practically non-existent. It is no surprise, hence, that both fundamental and technical indicators signal that the Krona/Krone are grossly undervalued. Bloomberg News reports:
Based on purchasing-power parity, which measures the relative level of currencies based on the cost of goods in different countries, the krone and krona are the only ones undervalued versus the dollar among their eight most-traded peers, according to data compiled by Bloomberg.
Central Banks Unite!
As Karl Marx once proclaimed, "Central Banks of the world: Unite!" Well, not exactly….
In any event, six of the world’s largest Central Banks have come together in an unprecedented display of force, simultaneously lowering their benchmark interest rates. The Federal Reserve bank and European Central Bank appear to have spearheaded the effort, and were joined by the Banks of China, Switzerland, Britain, and Canada. The Bank of Japan remained on the sidelines, but it probably wouldn’t have made a difference given its already record-low rates. Obviously, the global rate cut was designed to be as much symbolic as economic. However, it’s not clear whether investors will take the hint, given that they have already ignored the Trillions of Dollars that have been spent by Central Banks and governments around the world. As far as currencies are concerned, if the global ship continues to sink, the two proxies for risk aversion - Dollar and Yen - will continue to lead the pack. In other words, fear is proving itself a much more powerful force than economic reality. The New York Times reports:
“The move is to be applauded but there is more to come. The playbook to avoid depressions says rates need to be as close to zero as possible.”
AUD Draws Closer to Parity.
The Australian Dollar is rapidly approaching parity with the USD, having risen 12.8% in the year-to-date. In fact, it recently notched a 24-year high against the Dollar. The currency’s strength is connected closely with the US-Australia interest rate differential, which currently measures a whopping 5%. While the Australian Dollar has always been a favorite target of carry traders, it has received a special boost from the easing of US monetary policy, which has turned the Dollar into a funding currency. The New Zealand Kiwi has also performed well, thanks to a benchmark interest rate of 8.25%. However, New Zealand rates are probably headed downwards, whereas the consensus for Australia is for rates to remain at current levels, or even to rise, depending on inflation. Bloomberg News reports:
Board members decided to leave the rate at 7.25 percent because of "the substantial tightening" in financial conditions since mid-2007 and "uncertainty surrounding" the outlook for economic growth and inflation.
AUD Nears Parity.
The word "parity" is becoming a mainstay of traders in the forex markets. In 2007, it applied to the Canadian Dollar, which had rallied 70% over the course of five years to reach the mythical 1:1 level against the USD. This year, it is the Australian Dollar that is threatening to surpass the Dollar in value. The AUD has always benefited from general USD weakness, but now the focus is shifting to the AUD, itself. The most recent Australian price data suggests that inflation in Australia remains problematic, which could force its Central Bank to raise the benchmark lending rate to 7.5%. In addition, high commodity prices and consequently strong exports should provide demand for the currency. As always, analysts are divided over the likelihood of parity, but that hasn’t stopped them from bandying the term about. The Australian Age reports:
Parity was never a "ridiculous suggestion." "But it’s probably a bit tougher going because the Australian economy is slowing," says one analyst. "Then again, if you saw a reacceleration in growth, that might be a different story."
ML Introduces 5 Currency ETNs.
Together with a consortium of large banks, Merrill Lynch recently formed ELEMENTS, which unveiled five new currency Exchange Traded Notes (ETNs). Before ML entered the market via ELEMENTS, there were only two banks offering currency ETF products: Barclays Capital and Rydex, whose funds are branded CurrencyShares and iPath, respectively. ETNs differ from ETFs in that the former represent a debt obligation whereas the latter represent a form of equity. In practice, however, since the risk of default is relatively low, the two types of securities are functionally equivalent. Both pay interest slightly below the benchmark interest rates of the currencies to which they are connected. The five new ELEMENTS ETNs are separately tied to the performance of the Canadian Dollar, Euro, Swiss Franc, British Pound, and Australian Dollar. Index Universe reports:
Why would anyone choose the new ELEMENTS ETFs? Because they make semiannual cash dividend payments to noteholders based on the interest income. The iPath ETNs, in contrast, incorporate that income into the value of the note … a kind of "virtual interest" that is only realized when the noteholder sells.
Previsão de Forex.
Forex Forecast - try saying that three times fast! The Market Oracle, an online financial publication, has done even better, preparing a one-year forecast for all of the major currencies along with a detailed analysis of the major factors driving each currency in the month of February. The Dollar and Yen are projected to be the strongest performers in this time frame, benefiting from a trend towards risk aversion. It should be noted that this prediction is consistent with news reported by the Forex Blog earlier this week. On the other hand, currencies that have been propped up by the Yen carry trade, namely those of Australia, New Zealand, Canada and South Africa, will face selling pressure. The British Pound is projected to underperform slightly, due to an easing of British monetary policy, which will narrow the interest rate advantage claimed over the US.
Finally, the Euro is something of a wildcard. On the one hand, the EU economy is stagnating, and the ECB has hinted that rate cuts are a possibility. On the other hand, the Euro theoretically stands to inherit a significant amount of risk-averse capital, especially from foreign investors looking for a stable alternative to the Dollar. Accordingly, the Market Oracle forecasts a short-term decline in the value of the Euro but a long-term appreciation.
USD Draws Support from Abroad.
2008 is still in its infancy, which means the self-proclaimed forex experts can be excused for offering their projections on what the year has in store for the Dollar. If currencies were traded in a vaccum, the Dollar would probably trend upward, since many technical factors suggest it is oversold. From a fundamental standpoint, however, it is probably overvalued, per the laws of interest rate parity and purchasing power parity. Relative to other countries, though, it may be undervalued. From this standpoint, argue some analysts, the biggest impetus for a Dollar upswing will come not from good news emanating from the US, but rather from bad news emanating from the rest of the world. For example, the British economy, balance of trade, and monetary policy outlook is even more bleak than the US. The CEO of Airbus, one of the EU’s most important companies, has threatened to shift production away from the EU if the Euro remains expensive. Finally, the Central Bank of China is allowing the Yuan to appreciate at a faster pace against the Dollar. As far as Dollar bulls are concerned, it might be best if the US government simply sits tight. The BBC reports:
"A lot of bad news is already priced into the dollar. It’s elsewhere that the shocks could come from, perhaps from the European Central Bank, or the Bank of England."
Swiss Franc Benefits from Volatility.
As the Japanese Yen continues to enjoy the carry trade limelight, another currency fulfilling a similar role has been largely overlooked: the Swiss Franc. While not quite as low as rates in Japan, Swiss interest rates are still extremely modest by international standards. As a result, many carry traders have used the Swiss Franc in much the same way as the Japanese Yen, selling it short in favor of higher-yielding currencies. And, just as the Japanese Yen has begun climbing over the last few months, so has the Swiss Franc. The volatility in capital markets caused by the credit crunch is just as prevalent in forex markets, and is leading currency traders to eschew yield (high interest rates) in favor of stability, which benefits currencies like the Franc. The Economic Times reports:
Another trader with a multinational bank said with carry trades now coming under heavy pressure and banks being reluctant to fund investors entering into such trades, risk aversion seems to be taking over the global currency markets.
The Other Side of the Debate.
Yesterday, I posted about how market volatility could spell the end of the carry trade, bringing down the Australian Dollar in the process. Today, I will explore the opposite side of the debate, by looking at the factor(s) which support a continued appreciation of the AUD. A rise in global commodity prices have provided a windfall to Australia, which is rich in natural resources. Unfortunately, the boom in exports and the surge in domestic demand has trickled down in the form of inflation. As a result, the Central Bank of Australia recently embarked on a campaign of tightening monetary policy. While this may curb domestic demand, it may attract more foreign capital in the form of carry trades. The gap between US and Australian interest rates is now 2.25%, and looks set to widen further. The Australian Business reports:
The [Australian] dollar’s trade-weighted value rose by 20 per cent between late 2002 and early 2004 but was much slower to respond in the 1970s boom, when the exchange rate was set by government.
Volatility Threatens Carry Trade.
Advocates of the carry trade have long argued that the only thing that could possibly put an end to their fun would be a significant rise in Japanese interest rates, which seems quite unlikely at this point. However, a new threat to the carry trade has emerged: volatility. Global capital markets have see-sawed over the last few months as credit concerns have surfaced, often related to America’s housing bubble. This month, the Australian Dollar and New Zealand Kiwi have been the two worst performers among the world’s 17 most actively-traded currencies. This is notable because these two currencies are most likely to be on the long end of carry trades. Bloomberg News reports:
The currencies also slid against the U. S. dollar as Citigroup Inc. said it will report as much as $11 billion in additional writedowns, reducing demand for so-called carry trades.
Australia to Hike Rates.
Australia’s benchmark interest rate, at 6.50%, is already the highest in the industrialized world, after New Zealand. Ignoring the pleas of the Treasurer, the Central Bank of has all but decided to hike rates even further into the stratosphere at its next meeting. The country is in a bit of a pickle, since a booming economy and the consequent inflation seems to demand a rate hike. At the same time, this rate hike will ensure that Australia continues to be on the receiving end of Japanese carry trades, and this is precisely what irks Peter Costello, Australia’s Treasurer. In other words, the world’s massive economic imbalances will only be exacerbated by an Australian rate hike, but this may be a moot point as far as the Central Bank is concerned. The Sydney Morning Herald reports:
Instability on global financial markets between now and the next Reserve Bank board meeting on Melbourne Cup day is seen by economists as the only force that could stay the bank’s hand from raising rates to the highest level in a decade.
Australian Dollar Approaches Parity.
Over the last few months, the Australian Dollar has risen over 15% against the USD, bringing the currency to a 23-year high. With parity (1:1 exchange rate) in sight, some analysts are beginning to draw parallels between the Australian Dollar and the Canadian Dollar, which skyrocketed to parity against the USD just last month. Both economies are rich in natural resources, relying heavily on them to drive exports. In fact, more than half of Australia’s exports are comprised of natural resources. It is no surprise that as oil, gold, and a host of other raw materials have surged to record highs, the Australian economy has outperformed even the rosiest of expectations. With China’s economic boom promising to keep raw material prices high for the near future, the prospects for Australia’s economy, and hence its currency, are brighter than ever.
What’s more, the basic divergence in growth is clearly tipping towards the momentum underlying the Aussie economy with consumer spending, business investment and export income promising strength for the economy and currency in the months to come.
Australian Dollar Reaches Record High.
The Australian Dollar recently touched a 20-year high against the USD, having risen 15% in the last month alone. In fact, the currency has proved to be one of the top performers against the USD in 2007, having benefited from continued weakness in the US economy. It has also been one of the chief beneficiaries of the Yen carry trade, in which investors have sold Yen in favor of higher-yielding currencies, which also include the Swiss Franc and New Zealand Dollar. Meanwhile, Australia’s economy is surging, as Chinese demand for raw materials is unabated. Many analysts are asserting that the Australian Dollar can go no higher, citing technical factors. However, there seems to be just as many analysts who expect the AUD to test the outer limits of parity with the USD. The Sydney Morning Herald reports:
The chief equities economist at CommSec, Craig James, said the dollar was now likely to enter the “nervous nineties.”
Dollar Holds Steady as World Awaits US Data Reports.
Credit problems in the US have been the source of much turmoil throughout the global markets in the past few months. Tuesday was good for the US dollar, which held strong against both the yen and the euro. However, forthcoming economic reports from the US may or may not tip the scales. According to Reuters:
"The panic is almost over, but the market has lost its direction and is waiting for more news, especially any good news," said Kikuko Takeda, a currency strategist at Bank of Tokyo-Mitsubishi UFJ.
Read more: Dollar drifts as U. S. data awaited for direction.
President Bush Announces Plan That Boosts Risky Currencies.
Friday is looking up for risky currencies, as President Bush will announce a plan to help US homeowners who are at risk of defaulting on their mortgage loan. This has eased the concerns of many forex traders who have been resting their money in low-yield currencies like the yen. Now, with the subprime mortgage issues being addressed by the US government, high-risk investments will resume. Reports Reuters:
"There is some reaction to Bush’s plans to help out people who are in trouble with their mortgage payments and markets are also expecting some comments from Bernanke this afternoon regarding rate cuts. Both these factors are helping the carry trade," said Carsten Fritsch, currency strategist at Commerzbank Corporates & Markets in Frankfurt.
Interest Rate Differentials Rule Forex Markets.
It has been a while since forex markets have been as focused on interest rate differentials as they are now. With the exception of the Canadian Loonie and Australian Dollar, all of the world’s major currencies are rising and falling almost entirely on the basis of interest rates. Until recently, the USD had forestalled its inevitable decline because interest rate levels were significantly higher than in other countries, and foreigners remained willing to finance the US trade deficit. Since the respective Central Banks of Britain and the EU began hiking rates, however, the Euro and British Pound have risen while the Dollar has plummeted.
Meanwhile, the Japanese Yen is near historic lows because carry traders are borrowing at low Japanese rates and investing abroad. On the flipside, the New Zealand Dollar has surged, and the country is having a difficult time keeping investors away because its interest rates are so high. Interest rates have achieved such force that even changes in expectations, rather than changes in actual rates, are now more than capable of moving the market significantly.
Carry Trade Affects Swiss Franc.
Low volatility combined with even lower interest rates has made the Japanese Yen into a popular target among forex traders, who borrow in Yen and short the currency in favor of higher-yielding alternatives. It turns out the Japanese Yen, however, is not the only currency that is being driven downward by the carry trade; the Swiss Franc (CHF) has also become a victim in the last couple years. Switzerland’s benchmark interest rate, at 2.25%, is the second lowest among industrialized nations, after Japan. Moreover, the Swiss Franc is highly stable and liquid, which means it is well-suited for the carry trade. Dow Jones News reports:
With global risk appetite remaining strong and carry trades remaining one of the primary driving forces in global currency markets, the franc is unlikely to get much respite from rate hike expectations.
Read More: Swiss Franc Slide Likely To Continue.
Warren Buffet Returns to Forex.
Two years ago, Warren Buffet made headlines when he entrenched a $20 Billion dollar bet that the USD would decline in the near term. Unfortunately for Mr. Buffet, who happens to be one of the world’s most respected investors, the Dollar had a great year, and Buffet lost almost $1 Billion. [However, over the course of the bet, which actually began three years prior, his company, Berkshire Hathaway, reputedly pocketed over $2 Billion]. Now, after a long hiatus, Buffet is returning to forex markets, though with much coyness; he has not announced explicitly which currency he is betting on. Analysts have varying opinions, with some speculating that he is shoring up his bet against the USD, while others anticipate a bet against the Yen, which is vastly undervalued, from a fundamental economic standpoint. Regardless, the markets are sure to take notice of someone of Buffet’s stature. The Financial Times reports:
Perhaps the most surprising call for him would be to reverse.
his stance on the dollar. Paul Mackel, currency strategist at HSBC, says it is possible that Mr Buffett thinks that US economic growth could accelerate, and has bought the currency.
New currency ETF debuts on AMEX.
An exchange-traded-fund (ETF) is similar to an index fund in that both types of securities are designed to track the performance of the index to which they are assigned. The crucial difference, however, lies in the fact that there is no centralized market for mutual funds, whereas ETFs trade on exchanges, and hence, charge lower fees to investors. At first, investment companies were reluctant to create currency ETFs, because they weren’t sure if demand was large enough to justify such products. Since currency trading surged in popularity, a spate of new currency ETFs have been introduced, the newest of which is designed to track the performance of a composite of ten of the world’s most important currencies. Previously, this type of product was only available to wealthy investors. Now, anyone with a brokerage account can index in such a way, and would be smart to do just that, in order to hedge against the decline in any single currency. The Daily News reports:
The fund is managed by DB Commodity Services LLC. “DBV will offer investors easy access to the returns of the currency markets by following a highly developed index previously available only to very sophisticated investors.”
Inflation may drive UK rate hike.
The UK Pound has stood in virtual lockstep with the Euro, as both currencies have steadily appreciated against the USD. The UK Pound is poised to breakout, however, due to relatively high inflation. Inflation, in and of itself, would theoretically be expected to erode purchasing power and thus lead to currency depreciation. In this case, the opposite will likely obtain, as the byproduct of inflation will likely be a rate hike by the UK Central Bank to keep pace with price levels. The move will bring the short-term UK rate to 5%, just below the US Federal Funds Rate. AFX News reports:
”With consumer price inflation unexpectedly moving back up in August and core inflation rising, another interest rate hike in November remains very much on the cards.”
Australian Dollar buoyed by strong economy.
The flagging Australian Dollar received a boost from the release of certain economic data, which seemed to paint an upbeat picture of the Australian economy. Australia recorded real GDP growth of 2.7%, marking the 14th consecutive year of economic expansion. In addition, Australian companies are realizing record profits, which they have promptly reinvested to drive growth. Coupled with falling energy prices and low levels of inflation, increased corporate investment signals Australia’s economy is in excellent shape. Forex traders reacted positively to the economic data and the subsequent decision by the Bank of Australia to maintain interest rates at current levels. The Financial Times reports:
The news, combined with Wednesday’s decision by the Reserve Bank of Australia, the central bank, to hold interest rates steady, helped nudge up the Australian dollar toward 77 cents against the greenback, outperforming other major currencies.
Canadian Dollar and Oil highly correlated.
According to Bloomberg News, the correlation of the Canadian Dollar with the price of oil is currently .88, meaning there is an 88% of the Canadian Dollar appreciating following an increase in the price of oil. This relationship seems to explain much of the Canadian Dollar’s recent strength; the currency has appreciated against the USD for four consecutive weeks. Hurricane Katrina indirectly provided additional support for the currency, as Canadian oil and gas exporters have benefited from commodity prices, which are expected to remain high in the near-term. On September 7, the Central Bank of Canada is expected to raise interest rates and provide guidance for future rate hikes. Bloomberg News reports:
Stronger growth may prompt the Bank of Canada…to raise its benchmark interest rate more than once this year after keeping it unchanged since [last] October.
Canadian Dollar linked to Oil.
It seems Canadian exchange rates are highly correlated with the price of oil. This is not surprising, as resource-rich Canada has the second largest proven oil reserves in the world. In short, as oil has soared to record highs, the Canadian Dollar has also risen. At this point, a play on the Canadian Dollar is tantamount to betting the price of oil will continue to surge. A general rise in commodity prices has also made Canadian natural resource companies more profitable and hence, more valuable. Foreign investors have poured money into Canadian resource stocks, some of which may soon be acquired by foreign firms. These investments necessitate foreign currency conversion into Canadian Dollars, which has further boosted the currency. If this were not enough, Canada’s economy is strong, its trade surplus is growing, and its Central Bank may soon raise interest rates. Bloomberg news reports:
“Oil, equities and general U. S. dollar selling” is supporting the Canadian dollar, said a chief foreign-exchange strategist. The Canadian dollar may also benefit from being included in China’s currency basket as investors speculate about “the Chinese putting more of their money into Canada.”
Rising US rates could impact NZD.
The New Zealand Dollar (NZD) continues to perform well, no doubt helped by a federal interest rate of 6.75%, which is currently the highest in the developed world. Investors in search of (relatively) risk - free returns have entered New Zealand en masse, sending the NZD to higher levels. This has occurred in spite of New Zealand’s lackluster economy, which is expected to grow by only 2% annually over the next couple of years. However, as US interest rates rise, the US-New Zealand interest rate differential, which in the past has been a source of NZD strength, narrows proportionately. This trend, combined with the prospect of falling rates in New Zealand, has led currency strategists to reevaluate their expectations for the NZD. Bloomberg news reports:
“With a declining yield spread against the U. S. we continue to favor selling rallies in the New Zealand dollar,” said a currency strategist at Bank of New Zealand.
Australian Dollar continues to appreciate.
Among the world’s major currencies, it seems the Australian Dollar is currently the most stable. Uncertainty surrounding the future of the EU has sent the Euro on a sharp downward spiral. Meanwhile, the persistence of the twin deficits continues to vex the US, and Japan has barely emerged from the throes of a multi-year recession. In contrast, Australia’s economy is one of the healthiest and most stable among developed nations, and its interest rates are the highest in the developed world. Additionally, commodity prices are soaring, and inflation remains low. The Australian Dollar may be buoyed in the coming months by signs the Fed and European Central Bank are tightening monetary policy, which is likely to attract risk-averse foreign investors. The Australian Financial Review reports:
With the two major global currencies so much out of favour and the Australian currency’s traditional drivers all flashing green, traders and speculators are finding they need little excuse to load up on the $A.
Canada’s Liberal Party Survives.
For the last month few months, Canada has been embroiled in a political conflict with potentially far-reaching ramifications. The ruling Liberal Party stands accused of accepting bribes in exchange for doling out lucrative advertising contracts. Although no formal charges have been brought, many politicians have lobbied aggressively for a recall election of some kind. The action reached a climax last week, when it was expected the House of Commons would vote "no confidence" in the liberals. At the last minute, a prominent conservative switched parties, and was suspiciously awarded a cabinet position. The upshot is the Liberal Party will remain in power, but conservatives remain undeterred in their push for a change in power. However, this defeat has dealt a serious blow to their campaign. The Wall Street Journal reports:
[A conservative] said she had been troubled by Mr. Harper’s strategy of trying to force a snap election by allying with the bloc Quebecois, which advocates independence for French-speaking Quebec province.
Canadian political crisis spreads to currency.
The Canadian Dollar or ‘Loonie’ has declined to 7-month lows against the US Dollar, due largely to political uncertainty. And some analysts believe the worst is yet to come. The reason is most currency traders are valuing the loonie as though the current political crisis will soon resolve itself. In all likelihood, the current Prime Minister, Paul Martin, will soon be impeached. The PM’s budget is currently being mooted by Canadian Parliament; if conservatives have their way, the budget will soon be rejected. Such an event would likely send the loonie spiraling downward to new lows. Analysts are also careful to note other macroeconomic factors which may be contributing to the loonie’s decline. For instance, the recent decline in commodity prices has resulted in lower export revenues. In addition, a rising interest rate differential between Canada and the US may be driving risk-averse investors to move capital to the US. The Canadian Press reports:
The risk now is, the market is ill-prepared for the government to lose the vote. Even if risk-averse traders saw their worst fears realized and a federal election was called, experts say the volatility wouldn’t likely have lasted more than a few days. International traders would quickly lose interest and avoid buying or selling the dollar until election day.
Canadian Dollar hits 7-month low.
Last week, the Canadian Dollar began to fall precipitously, reaching a 7-month low. There were several factors which help to explain the sudden drop. First, Canadian Parliament passed a bill which effectively called into question the Prime Minister’s leadership. The bill goes so far as to demand the PM’s (Paul Martin) resignation. Next week, Parliament will vote on Martin’s federal budget proposal. Analysts agree that a rejection of the budget is tantamount to a vote of no-confidence in the prime minister. A second cause for the decline in the Canadian Dollar may in fact be Canada’s declining trade surplus. As the Canadian Dollar has appreciated, Canadian exports have become less competitive. As a result, manufacturing output and exports have both declined in recent months. The Canadian Dollar may suffer a "correction" in the short term as investors brace for political and economic uncertainty. Bloomberg News reports:
Canada’s dollar has slipped 3.3 percent since April 7, when Justice John Gomery released the first portions of testimony from an inquiry that showed the ruling Liberals received payments in exchange for government advertising contracts in the province of Quebec. The scandal prompted the Conservatives to call for a no - confidence vote.
Australia announces tax cuts.
After their victory in last month’s election, Australia’s center-right coalition has announced sweeping tax cuts. The government will return a $16 Billion budget surplus to citizens and businesses over the next four years. The purpose of the tax cuts is to stimulate an economy that has never fully recovered from the recession which occurred several years ago. Economists predict real GDP growth of 3% this year, which seems respectable until you compare it to rates of 4-5% which Australia perennially grew at in the late 1990’s. Most of the tax cuts will take the form of a drop in personal income taxes, although retirees and businesses will also receive some of the surplus. Economists believe the tax cuts will be effective in stimulating the economy. However, not everyone is satisfied. The Financial Times reports:
“There is a lot in this budget that deserves a tick but it is also a budget of missed opportunities,” said Peter Hendy of the Australian Chamber of Commerce and Industry.
Canadian jobs report buoys loonie.
Last month, the story in Canada was of political fraud. However, the situation has been neutralized, and a recall election is no longer likely. As a result, Canadian investors have turned to economic statistics to shed light on the future direction of the Canadian dollar (loonie). The recent release of Canadian employment statistics underscores the strength of the vigor of the Canadian economy. Nearly 30,000 new jobs were created last month, the most in over six months. However, note analysts, many of these jobs were created in the public sector, and growth in manufacturing jobs is sluggish. The next major event will be the publication of Ontario’s budget, noteworthy because Ontario is the largest Canadian province. Investors also await the release of new housing starts, and the trade balance with the US, expected to be positive. With the recall election a moot point, currency traders expect the loonie to continue to appreciate against the Dollar. The Canadian Press reports:
"I don’t want to ignore the political backdrop, but I think a lot of that got factored into the currency in April when the Canadian dollar was the weakest major currency in the world," said a senior economist. "And to some extent the currency markets have already moved on and are looking at other things now."
Inflation may cause rate increase in UK.
The British Pound is continuing its run against the USD, as investors and traders anticipate a rise in UK interest rates. Newly released inflation data indicates that prices are increasing at a faster pace than interest rates, due to surprising strength in Britain’s economy. At last month’s meeting of the UK central bank, only one member voted to raise rates. At the time, the other members were confident that interest rates accurately reflected inflation expectations, and voted not to change rates. In response to this new development, they may be forced to act. Economists, however, are quick to point out that much of the rise in prices can be attributed to rising transportation and energy costs, and may not be an accurate metric of general economic performance. The Financial Times reports:
A senior forex strategist said that inflation was just 1.3 per cent if energy and transport costs were stripped out. He argued that the Bank would be unlikely to hike rates in response to an energy shock unless there was evidence of this feeding through into second-round effects such as higher wage growth.
Political Instability Grips Canada.
Canada is undergoing a political crisis with potentially far-reaching implications. The investigation concerns members of the Liberal Party of Canada, who may have received kickbacks in exchange for lucrative advertising contracts. The most prominent member of the Liberal Party happens to be Paul Martin, the Prime Minister of Canada. It is distinctly possible that Canadian Parliament will force an ad hoc election to see if Paul Martin shall remain Prime Minister.
It is extremely difficult to forecast the effects this type of crisis will exert on the economy, especially in a nation is perennially stable as Canada. Regardless, many investors are rushing for the exits, selling Canadian equities and Canadian Dollars. It is uncertain whether the political crisis is solely responsible for this flight of capital. Many analysts point to recent declines in the prices of global commodities, which could adversely effect Canada, a nation rich in natural resources. In addition, the Central Bank of Canada does not look set to raise interest rates, while its counterpart to the South will likely continue to raise rates at a measured pace. For all of these reasons, it will probably not be smooth sailing for the Canadian Dollar. Globeandmail reports:
"Political uncertainty may now be filtering through into foreign exchange markets," concurred Avery Shenfeld, senior economist at CIBC World Markets Inc. "We’re getting a lot of calls about the odds of an election in the next few months. It has forced the markets to put a political-risk premium into Canadian assets, whether it’s stocks, bonds or the currency," ele disse.
Auto manufacturers react to exchange rate fluctuations.
At a recent automobile show in New York, auto manufacturers were talking about more than just the new models they planned to unveil - they also talked about how changes in the exchange rate were affecting business. American manufacturers have been the largest beneficiaries of the USD depreciation. In fact, many are beginning to export American-made cars to Europe, something which has been done only on a very limited basis in the past. Some foreign manufacturers are shifting production of cars sold in the US, to the US. Mitsubishi and Toyota are two examples of such companies. While clearly upset at the current situation, other foreign manufactures are using the poor exchange rate as an excuse to become more efficient and drive down costs. In the early 1990’s, Toyota adopted many changes in response to a Strong Yen. After the Yen stabilized, Toyota was left with a vastly improved workforce and streamlined operations, and became even more profitable than it had been prior to the Yen’s rally. Forbes reports:
Automakers outside the United States have born the brunt of the exchange-rate damage, but they shrugged off the currency effects in interviews this week. That’s because most remember that last time the dollar was weak, their factories were mainly overseas. Since then, many have opened factories in the U. S.
Most Influential People in FX.
A recent survey attempts to identify the most important people in foreign exchange markets. Topping the list, unsurprisingly, is Alan Greenspan, chairman of the US Federal Reserve. The USD is the world’s reserve currency, and Greenspan largely determines US interest rates. However, Greenspan will be stepping down in less than one year, and Ben Bernanke is rumored to be his replacement. He is an advocate of ‘neutral’ interest rates, and increased monetary transparency.
Jean-Claude Trichet, president of the European Central Bank, is probably the most influential foreigner. Although his past has been characterized by scandal, Trichet has earned the respect of most of the EU for his leadership during the transition to one universal European currency. Trichet is known for predicating monetary policy decisions on inflation expectations, rather than on economic growth. Accordingly, most economists agree that EU rates will continue to climb. Herve Gaymard, French minister of finance, has also achieved notoriety for his loud criticism of the weak dollar. He is encouraging Asian and European Central Banks to intervene and stem the dollar’s decline.
Gordon Brown, chancellor of the UK exchequer, is probably as important more popular than Tony Blair, and a fiscal conservatist. He has managed to contain government spending, and prevented tax rates from increasing. Finally, Alan Bollard, governor of the reserve bank of New Zealand, has also achieved prominence, as New Zealand’s interest rates are the highest in the developed world. As New Zealand’s economy continues to grow, so may its interest rates.
UK Central Bank holds rates constant.
The UK Central Bank voted today to keep interest rates constant at 4.75%. The Bank’s decision not to raise rates was based on the economy’s recent stagnation, and general sentiments that inflation was where it should be. Most economists agree there is still downside risk in Britain’s economy, as the housing market and the manufacturing sector are still weak. Investors anxiously await the publishing of the Bank’s minutes, to see if there were any dissenting votes, as was the case at last month’s meeting. Such dissension, combined with a release of new macroeconomic projections, might lead to a rate hike in the coming months. But, as BNP Paribas reports, such is unlikely:
Nevertheless, the MPC is likely to keep rates on hold in the coming months as more evidence of sub-trend growth is likely to appear. A possible rate cut will crucially depend on the next Chancellor’s fiscal policy. A tighter fiscal stance could pave the way for more monetary relaxation, but such a change can for the moment be ruled out.
Australia, New Zealand currencies remain strong.
Investors have been flocking to the so-called Aznac (Australia and New Zealand) currencies of late, in search of high yields. Australia and New Zealand both currently offer some of the highest interest rates in the industrialized world. Moreover, analysts believe the two central banks will further tighten credit by raising interest rates in the near term. In the past, investors in search of risk-less, stable, returns simply purchased American treasury securities. However, as the USD declines, foreign investors earn negative real returns on the treasuries they hold. As a result, many are beginning to move money to other developed nations, where the risk of default is equally unlikely, but interest rates are higher. The Australian Financial Review Reports:
What looked like the long-awaited rebirth of the US dollar at the start of this year appears to have been a false signal. Investors, starved for yield elsewhere, are responding by recycling out of US dollar-denominated assets.
Japan looks to decrease USD reserves.
Japan has the largest USD reserves in the world, valued at over $700 Billion. The recent appreciation of the Japanese Yen against the dollar has effectively devalued these reserves. In fact, for each Yen gained against the Dollar (i. e. a move from 105 JPY/USD to 104 JPY/USD), Japan loses over $7 Billion Dollars. As a result, Japan’s central bank may follow Russia’s example by shedding some of its USD reserves, and replacing them with Euros. Analysts predict that Japan will ultimately hold Euros and USD in a 1:1 ratio. Japan is feeling additional pressure as a revaluation of the Chinese Yuan looms on the horizon. If its central bank doesn’t begin gradually selling off its dollar reserves now, it may find itself competing with China for buyers, which will only accelerate the decline of the dollar. Forexnews reports:
Japan should especially start lightening its hand from US assets before China initiates the fray when it eventually revalues its currency and sees less of a need to purchase US dollars in intervention over time.
Canadian Central Bank ponders interest rate hike.
Canada is a nation rich in natural resources. Accordingly, its economy has benefited from recent spikes in commodity prices, coupled with a broad increase in demand for raw materials. Unfortunately for Canada, this increase in demand has exerted upward pressure on its currency (CAD), which could plausibly lead to a reduction in future foreign demand for its products. The result is something of a catch-22: present increases in exports may be offset by future decreases. In response, the Canadian Central Bank will forgo a planned hike in exchange rates, and instead wait until the Canadian Dollar (hopefully) depreciates relative to the USD. Mellon Financial Reports:
General USD movement…is problematic, as the economy is penalised by the stronger CAD, without benefiting from higher demand for Canadian products.

international.
Paris - High oil prices and foreign exchange rates are to figure on the agenda of a G8 summit next week in the United States, a source close to the French president's office said Friday.
The annual meeting of leaders from the Group of Eight - Britain, Canada, France, Germany, Italy, Japan, Russia and the United States - traditionally includes a discussion of the global economy.
This year, G8 chiefs holed up on Sea Island, Georgia for three days starting Tuesday will meet under the shadow of a spike in oil prices that could take the shine off the strongest global economic growth in 15 years.
"The summit is taking place at a time when the economy is strong," a statment by G8 finance ministers said in late May at a meeting in New York.
"The rebound is gaining ground rapidly, increasing by 4.0-4.25 percent in 2003 and 2004, the best growth rate for the global economy in the past 15 years."
But on Tuesday, oil prices hit a record $42.33 a barrel in New York after a weekend attack in Saudi Arabia fueled fears about terrorist disruptions to energy supplies.
Prices later fell back on expectations Opec would raise its official oil output ceiling and perhaps allow members to further exceed production quotas.
Meanwhile, the question of foreign exchange has lost some of its urgency since the beginning of the year.
G7 finance ministers, the Group of Eight minus Russia, warned currency markets in early February that governments were concerned by excessive volatility and the euro subsequently eased off its high levels against the dollar. - AFP.
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