Some interesting currency moves today

[JR8]

Better get used to the idea of the bearded one being at the very least Tánaiste (Deputy PM) of Ireland.

Perhaps he'll go for a cushy job as an MEP next, and be despatched by Berlin to go and terrorise the poor Greeks [/irony]

[Wd40]

If anyone noticed, SGD fell yesterday quickly from 1.345 to below 1.35 this is why:

http://www.channelnewsasia.com/news/sin ... 20226.html

The Monetary Authority of Singapore (MAS) said on Wednesday (Jan 28) it will adjust its monetary policy and let the Singapore dollar appreciate at a slower pace.

The revision in monetary policy came as a surprise as MAS was only scheduled to release its next monetary policy statement in April. MAS last made an "off-cycle" adjustment to policy in October 2001, in the aftermath of the Sep 11 attacks in the United States. At that time, MAS issued policy statements in January and July.

The Singapore dollar fell on the news, losing close to 1 per cent against the US dollar and by around 0.5 per cent against the euro. Around 11.30am, the US dollar was trading around S$1.3521, while the euro was worth S$1.5328, according to Bloomberg data

"While Singapore has brought its exchange rate policy closer to the generalised monetary easing seen in many countries globally, it still has a modest apprecia­tion policy," DBS said in a commentary.

As such, the US dollar is expected to rise at a slower pace against the Singapore vis-a-vis the currencies of most other countries, it said.

United Overseas Bank said that in view of the lowered Singapore dollar NEER slope, the US-Singapore dollar could trade towards the 1.40-level over the next six months.

Since I dont read local news I missed this yesterday. I got to know about it only now from this article:
http://www.cnbc.com/id/102374804

[Wd40]

Today is the Aussie's turn to fall

http://www.smh.com.au/business/markets/ ... 31lcv.html

[JR8]

Interesting article there from the SMH. Seems like the fall-out from the economic pygmies running the euro is descending upon the world furthest outposts; a financial Chernobyl of sorts.

What I hadn't considered is that Denmark (a non-euro country) is also pegged to the euro. And it's central bank is now having to drop rates to defend it. I suppose being within close proximity of the euro-zone, whereby 'Herr Schmidt and Monsieur Durbac' [i.e. stereotypical Germans and French] can stagger over the border carrying bin-bags of ever depreciating euro currency has it's drawbacks.

This had me wondering who if anyone might have pegs to the euro, where might the toxic cloud descend next?
'210 million people worldwide as of 2013—including 182 million people in Africa—use currencies pegged to the euro.' http://en.wikipedia.org/wiki/Euro
Wow, 210mm non eurozone citizens watching their income and savings getting fried.

'Bosnia & Herz. convertible mark
Bulgarian lev
Cape Verdean escudo
Central African CFA franc
CFP franc
Comorian franc
Danish krone (±2.25%)
Moroccan dirham
São Tomé and Príncipe dobra
West African CFA franc
From the same article on Wikipedia.

Morrocco must be regretting that now. IIRC they were shadowing the euro, not least to try and suggest that they're 'model Europeans' [sic] and should be admitted to the club, same as Turkey are doing. I wonder if Morocco have also gone so far as to re-mint their currency (a la Turkey) to almost precisely physically imitate the euro series of coins ? Hmmm .... partially it would seem... http://en.wikipedia.org/wiki/Moroccan_d ... _marocains_(MAD).jpeg

Hehehe.... the ISO code for their currency is 'MAD' ... hehe.... well quite, I expect they are!

[Strong Eagle]

Today is the Aussie's turn to fall

http://www.smh.com.au/business/markets/ ... 31lcv.html

The one thing in the article that makes no sense to me is the "backdrop of potential US interest rate rises". Why on earth would the US want to raise interest rates?

It's not like they are trying to attract investors into T-bills... inflation adjusted returns are zero or negative and the US has no problem selling debt.

A rise in interest rates would increase debt payments for the US... as it is, by turning over expensive old debt for 2 or 3 percent debt, the national debt has grown while debt service has decreased or stayed level.

The specter of inflation that so many right wing Republicans has not come to pass.

So again... why would the US want to increase interest rates when it is in its own interests in terms of debt financing and economic growth to keep them low?

[JR8]

I think the US rates are so critical to everything, the markets would run scared if Yellon so much as turned up wearing a different necklace ('What terrifying omen must this portend!?' )

To some extent the shock drop in oil has taken away the near-term risk of inflation (and associated rate rises). It's done her up-side job for her. But that a relatively volatile factor...

I think this article gives a useful overview of things as the US stands...
http://www.bbc.co.uk/news/business-31031643

It's concluding paragraph...

'Inflation puzzle

A crucial factor in determining a rise will be what happens with inflation in the US economy, as weak consumer demand and cheaper oil push inflation below the Fed's target of 2% in the "medium term".

That begs the question of whether the Fed will raise rates even if inflation is below expectations, as well as how long the "medium term" is in the Fed's view, adds Mr McCarthy

"We know that in the long run we are all dead," he says.

"Does the medium term imply that we will be approaching the end of the line before we see 2% inflation again?"'


As usual these 'once in a cycle' interest rate pivot-points are the source of huge uncertainty and volatility, especially so when it's the mighty US$ that's in consideration.

I'd put my virtual $2 on there being a 'relief rally' on the Dow when a rate hike is announced. The market favours direction over uncertainty to such an extent, it can rally even as a result of superficially bad news.

[JR8]

Just reading the news round-ups this morning. A few bits+pieces...

'While it is well-known that it supplies smartphone manufacturers with its precision measuring equipment, the company is very discrete about its dealings. Nevertheless, if one follows the trail of Apple’s supply chain that inevitably leads one to Renishaw’s [a chip manufacturer] doorstep. Just over 1% of the world’s population purchased an iPhone in quarter four of 2014.'
http://www.digitallook.com/news/tips-ro ... 46887.html

My bolding. That was a wow moment when I read that. 1%, globally, in a period of just 3 months. I can't imagine another $high-end product that has such global market penetration. Apple's shares are going bonkers too.

---
'Fed must hike rates sooner or risks falling behind the curve, says Bullard

St Louis Federal Reserve president, James Bullard, said the Fed should not delay its decision to hike interest rates for much longer as it risks falling behind the curve.

Bullard, who isn't a Federal Open Market Committee voter this year, described the European Central Bank's planned bond-buying programme as an "unmitigated good" for the US [*]economy, which would benefit from lower long term borrowing costs and cheaper fuel.

Earlier this week, the Fed reiterated its stance over interest rates, saying it would continue to adopt a patient approach for the foreseeable future

"If I were going to play it strategically I'd rather get off zero sooner and then have more flexibility to go slower and react to data," Bullard told Bloomberg TV.

He added that if the Fed procrastinates its rate hike, "we will have to move more aggressively at that point - instead of 25 points go 50 basis points, and that kind of dynamic is not a good one."'

[* suspect this might be a typo, and should be the EU. But it's too early for me to figure it out... ]
---- [/color]

Haven't read it yet, but should make an interesting read...
''Grexit' may be necessary to save Spain and avoid 'Spexit', says WSJ'
http://www.digitallook.com/news/europe- ... 47055.html

A new word for the day, Spexit

[Wd40]

'Poland and Hungary'. I haven't read the news recently about this whole saga so am unaware what their particular woes are, though I do understand that Hungary ties itself quite closely to the Swiss economy. But that's the risk, tying yourself to something over which you have no control. [X-ref S$, but at least in SGs case it's peg is against a wide enough basket of other currencies based upon physical trade, rather than being something essentially completely artificial].

Here is the article about Poles borrowing in CHF:

http://www.bloomberg.com/news/articles/ ... ing-market

The Szczukiewicz family is among 575,000 Polish households with franc mortgages, or almost half of all home loans. About 30 percent of them are now underwater, said Mieczyslaw Groszek, deputy head of the Polish Banks Association. These borrowers are stuck -- unable to buy another property -- because of the losses they would suffer, adding to the woes of a housing market in Poland that’s depended mainly on Polish cash buyers.

[x9200]

Here is the article about Poles borrowing in CHF:

http://www.bloomberg.com/news/articles/ ... ing-market

The Szczukiewicz family is among 575,000 Polish households with franc mortgages, or almost half of all home loans. About 30 percent of them are now underwater, said Mieczyslaw Groszek, deputy head of the Polish Banks Association. These borrowers are stuck -- unable to buy another property -- because of the losses they would suffer, adding to the woes of a housing market in Poland that’s depended mainly on Polish cash buyers.

No worry. This is probably the only thing they will suffer from (not able to sell their properties for some time). Most of them were not going to do it anyway as this was not for a speculative property market but to address their own needs. Also this dramatic property (loan) "revaluation" is mostly for the loans taken in (IIRC) ~2007-2008 where the prices of the properties were peak-high.

Besides, they knew what was the risk, they earlier earned some good money paying much lower loan repaymants (comparing to these in PLN) and above all, this type of loan was available only for middle and above income earners - for most of them this whole CHF problem translates probably to something like 2-5% increase in their monthly spendings.

[JR8]

Wow, half of Poland's outstanding mortgages are in Swiss Francs [and the central bank never considered this was risky?]
Maybe the property market functions more like the German one, where a family buys a property and lives there for life, and then it's passed to the next generation (who already live there too)... The place I lived, there were several neighbours who had been born in their current units, and pre-war too (pre 1939). A very alien concept to me, but it was fascinating to occasionally get to hear their stories of times back then.

In contrast the Anglo-Saxon model seems to be more of buy, trade-up, extend/remodel, trade up... and on and on, etc. End in as big/good enough place as you can. Then when your housing needs reduce, maybe when children move out and get their own places, then you are sitting on a valuable asset that represents a big chunk of a lot of people's accumulated wealth.

[JR8]

Below some statements from George Osbourne (equiv. UK-FinMin). Interesting the use of unvarnished language, bordering on undiplomatic.
Goes back to an earlier point that as much as Germany/France seek to divert attention by whipping the latest victim ever closer to death, the ailment is entirely of their own making.
[my bolding]

------------------------
George Osborne has warned that the impasse between the Eurozone and Greece poses “the greatest risk to the global economy”.

On Monday, the chancellor met Yanis Varoufakis, Greece’s finance minister, who is visiting Europe in a bid to win support from Eurozone members.

“We had a constructive discussion, and it is clear that the standoff between Greece and the Eurozone is the greatest risk to the global economy,” Osborne said.

“I urge the Greek finance minister to act responsibly but it’s also important that the Eurozone has a better plan for jobs and growth.

“It is a rising threat to the British economy. And we have got to make sure that in Europe, as in Britain, we choose competence over chaos.”

Following the meeting, the Greek finance minister said he agreed with his British counterpart over the need of stop describing Greece like a weight burdening the rest of the continent.

“[We have] a determination to put an end to the extended pretence cycle which has rendered Greece a festering wound on the side of the Eurozone,” Varoufakis was quoted as saying by Channel 4 News.
http://www.digitallook.com/news/interna ... 47589.html

[x9200]

Wow, half of Poland's outstanding mortgages are in Swiss Francs [and the central bank never considered this was risky?]
Maybe the property market functions more like the German one, where a family buys a property and lives there for life, and then it's passed to the next generation (who already live there too)... The place I lived, there were several neighbours who had been born in their current units, and pre-war too (pre 1939). A very alien concept to me, but it was fascinating to occasionally get to hear their stories of times back then.

In contrast the Anglo-Saxon model seems to be more of buy, trade-up, extend/remodel, trade up... and on and on, etc. End in as big/good enough place as you can. Then when your housing needs reduce, maybe when children move out and get their own places, then you are sitting on a valuable asset that represents a big chunk of a lot of people's accumulated wealth.

The Central Bank has informed about the risk but they probably have seen no reasons to intervene and rightly so (IMHO). As I said earlier, I don't think it is really a disaster of any kind.

For the property holding habits It is roughly like you mentioned for Germany (but not any longer about few generations living under one roof). Also, only recently (1 generation) the job market became more mobile. Traditionally, people are looking for a job where they currently live rather than in another city. Selling or renting out the property and moving out to a different city for a job is relatively uncommon.

[JR8]

For the property holding habits It is roughly like you mentioned for Germany (but not any longer about few generations living under one roof). Also, only recently (1 generation) the job market became more mobile. Traditionally, people are looking for a job where they currently live rather than in another city. Selling or renting out the property and moving out to a different city for a job is relatively uncommon.

Hmm I see, thanks.

Perhaps the more recent mobility came together with the opening of the economy (post Iron-curtain)? I.e. it forced this change, a need for mobility.

The UK used to be quite parochial with it's job market. Many people lived in the town or neighbourhood where they were born, and they expected to work there too. When globalisation started creeping in, and subsidies to historic industries (coal-mining, ship and car-building etc) some regions were very badly impacted, and so the old expectations re: getting a lifelong local job had to change. In the immortal words of Norman Tebbit, Margaret Thatcher's Minister for Employment/Trade, his response to the question: 'What do you say to the people who can't get a job?' - NT: 'I say get on your bike, and go and find one'*. I.e. Don't assume you'll find one on your doorstep, go and find one where ever it might be available.

Looking back now it's quite amazing that people needed to be told that; at the time it was so obvious in a way and yet also so bluntly novel to see it spelled out. Like a prototype version of the message behind 'Who moved my cheese?' He really was despised by those the message was aimed at, until and even beyond the day he died. It's not often you get politicians who tell it precisely how it is, with no fluff, nuance, or sugar-coating.

There was mention in the article linked earlier that people couldn't afford to redeem their mortgages, even if they wished to move. If so this also happened for a time in the UK, and it was really problematic for people in small units needing more space, or forced to move elsewhere. But later the banks introduced 'portable mortgages' that you could move with you, as you moved property, to the extent that I believe almost all mortgages are now portable.




*Correction:
'In the aftermath of the 1981 riots in Handsworth and Brixton, Tebbit responded to a suggestion by the Young Conservative National Chairman, Iain Picton that rioting was the natural reaction to unemployment:
'I grew up in the '30s with an unemployed father. He didn't riot. He got on his bike and looked for work, and he kept looking till he found it.'
As a result Tebbit is often misquoted as having directly told the unemployed to "get on your bike".
The former Conservative Prime Minister Harold Macmillan once remarked of Tebbit: "Heard a chap on the radio this morning talking with a cockney accent. They tell me he is one of Her Majesty's ministers".[17][18] Dr Peter Dorey of the Cardiff University wrote: "...it was Norman Tebbit...who was perhaps the public face or voice of Essex Man, and articulated his views and prejudices".[19]
http://en.wikipedia.org/wiki/Norman_Tebbit

[Wd40]

http://www.theguardian.com/australia-ne ... ement-live

Australia cut rates by 25bps. AUD falls. Now AUD is only 3.5 cents more expensive than the SGD

[Primrose Hill]

it is al getting rather interesting