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Some interesting currency moves today

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Re: Some interesting currency moves today

Postby Wd40 » Fri, 13 Feb 2015 11:27 pm

http://www.independent.co.uk/news/busin ... 41030.html

England too seems to be on the same boat as US, facing deflation yet talking about rate increase. Very confusing.

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Re: Some interesting currency moves today

Postby JR8 » Fri, 13 Feb 2015 11:32 pm

Strong Eagle wrote:All of this interest rate cutting means there is no way the USA is going to raise rates. There is no need to. There is so much money chasing investments and such turmoil in the currency markets that the US dollar is a safe haven even if it is paying nothing. Why would the US increase its debt service costs when it doesn't have to?


Makes sense. I don't know the 'balance of trade' betwixt the two, but if the US is say a net importer from the EU, then it is also a net importer of the EU's deflation.

Yellen can go take the mythical (in the US) 3 week vacation, her job is being done for her :lol:
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Re: Some interesting currency moves today

Postby JR8 » Mon, 16 Feb 2015 12:38 pm

Another interesting week ahead, with some very recent events apparently coming together in a positive way.

Fortunately too, Germany over the weekend appears to have stopped shelling (politically) Athens, and is maintaining a ceasefire for the time being [ half - :wink: ].

'Japan comes out of a recession'
http://www.bbc.com/news/business-31483274
'As Aristotle is reputed to have said: "One swallow does not a summer make, nor one fine day", so one quarter of positive GDP growth does not make a trend.'

Quite, but after a veeeery long and bleak economic winter even one lone swallow is a most welcome sign. Hence the Nikkei-225 hitting an 8-year high. And this morning it's just (for now) breached the psychologically important 18,000 level. Edit/add: The 'live' intra-day chart can be seen here: https://www.google.com/search?q=nikkei+ ... 8&oe=utf-8

'CBI upgrades UK growth forecast'
http://www.bbc.com/news/business-31480352
The CBIs opinions are significant, Wiki: 'The Confederation of British Industry is a UK business organisation, which in total speaks for 190,000 businesses... There are 140 trade associations within the confederation who, alongside those direct members of the CBI, employ 7 million people, about one third of the UK private sector-employed workforce'

'Eurozone economy sees growth pick up'
http://www.bbc.com/news/business-31451879
'The eurozone's economy grew by a stronger-than-expected 0.3% in the last three months of 2014, helped by rapid growth in Germany.'
But still no agreement in Athens, which will doubtless continue to pre-occupy the markets.

and:
- The Dow Jones has breached the mega-Resistance level of 18,000 (but will it hold it?)
- The Nikkei is rising and is (live/now) within 0.005% :o of also breaching 18,000 [Edit/Update, it's just breached it...]
- The German DAX index is under 0.5% from breaching 11,000 - one to watch

So ... taken together, a regular swallow, or a 'black swan-llow' week? :lol:
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Re: Some interesting currency moves today

Postby JR8 » Mon, 16 Feb 2015 4:56 pm

'TODAY'S AGENDA
Greece is the word: Eurozone finance ministers meet with Greek officials at 2pm in another attempt to agree on how the country will proceed after its bail-out programme expires later this month.'


'QUOTE OF THE DAY
It is now widely acknowledged - even within the eurozone - that forming the euro was a serious mistake.

Roger Bootle of Captial Economics says the euro should never have been born, although finance ministers have little choice but to press on with it.'

[From: The Daily Telegraph (UK) daily e-mailed news round-up]

So unfortunately what was promising to be a good day, is now perhaps going to tread water all day long waiting to see what happens re: Greece. [Yawns, so I reckon that makes it beer-o'clock.... 8-) ]


Edit to add: A headline from 15 minutes after my original post above...
'London open: Traders in holding pattern ahead of Eurogroup meeting'
'http://www.digitallook.com/news/market-report-opening/london-open-traders-in-holding-pattern-ahead-of-eurogroup-meeting--651891.html
'Traders are watching to see if Greece’s new government and the European Union are able to thrash out a compromise deal to solve the country’s debt burden or at least to ensure its access to external financing while a solution is found'

In other words, the EU markets are on stand-still waiting to see to what extent Germany continues to persecute Greece. But who knows, there might be a real surprise, a suggestion of some action, a micron of compromise ... but don't hold your breath... :roll:
Last edited by JR8 on Mon, 16 Feb 2015 5:42 pm, edited 1 time in total.
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Re: Some interesting currency moves today

Postby Wd40 » Mon, 16 Feb 2015 5:37 pm

This could be the ultimate black swan:
http://www.marketwatch.com/story/watch- ... 2015-02-15

Bank of America Merrill Lynch Global Research warns in a new report that it sees a “non-negligible” risk that China’s government will surprise the market by slashing the value of its currency.

To reach this conclusion requires not just a hard-nosed appraisal of China’s economic numbers, but also to consider the unthinkable, namely that Beijing might actually lose control of the situation.

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Re: Some interesting currency moves today

Postby Wd40 » Mon, 16 Feb 2015 9:41 pm

Another related article:

http://www.bloombergview.com/articles/2 ... n-in-china

Comments over the weekend by Guan Tao, head of international payments at the State Administration of Foreign Exchange, suggest Zhou's ability to ease may rapidly be evaporating. The problem? Fast-rising "uncertainty and instability" for capital shifts -- conditions, Guan warns, that are eerily reminiscent of the 1997-1998 Asian financial crisis.

As China’s currency watchdog, SAFE normally operates under a cloud of secrecy. For Guan to speak out so publicly suggests there’s good reason to be worried about the kind of sudden and massive outflows that flattened Indonesia, South Korea and Thailand nearly two decades ago.


Today, China can't boost exports by letting the yuan fall, for fear that untold numbers of foreign-currency deals might unravel. What really worries investors about Kaisa Group, a previously little-known property developer that missed a coupon payment last month, is that no one knows how many other developers may default if the yuan weakens. While the Bank for International Settlements estimates Chinese companies owe about $1.1 trillion, neither Zhou nor Chinese President Xi Jinping know for sure.


For all Xi's talk of epochal change, today's China finds itself much where Asia did in 1997 -- dependent on exports and excessive borrowing, and at the mercy of markets that have no trouble seeing through government spin.

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Re: Some interesting currency moves today

Postby JR8 » Tue, 17 Feb 2015 10:57 am

Wd40 wrote:As China’s currency watchdog, SAFE normally operates under a cloud of secrecy.


Managed currency pegs seem to have a tendency to end in catastrophe. I suppose secrecy, autocracy, or other forms of top-down semi-democracy (example: the Euro-zone), are not long-term viable bed-fellows. Because at some point the global economy will make that domestic arrangement barely viable, and/or the markets will en masse form something akin to a wolf-pack, and collectively seek to profit from the purely artificial and usually theoretically-based construct being broken. In a country or diverse region, where the 'rulers' are not nimble enough to adjust political/economic frameworks, as and when might be required, doom seems to inevitably loom (lol!) :)

'The strongest tree is the one that can bend with the wind' - don't know the source, but it sounds like a Chinese proverb.

Or, as Bruce Lee later put it - 'Notice that the stiffest tree is most easily cracked, while the bamboo or willow survives by bending with the wind'.

- The US is an example of where there are Federal rebalancing mechanisms. I'm sure they're not perfect (another topic), but they seem to have functioned pretty damn well for 200+ years without 'doing a Euro'. Will the EU 'rulers' ever take this on board? No. Not least because they are on a 60+ year old crusade to prove that they can be more successful than the US, without having the democracy, laws, and financial mechanisms have been the foundation of the viability and success of the USA.

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Re: Some interesting currency moves today

Postby Strong Eagle » Tue, 17 Feb 2015 12:05 pm

Interesting stuff, JR8. So, who really gets burned if the Yuan is devalued? The banks betting on the carry trade? Enough economic impact to start yet another "too big to fail" round of bailouts?

Otherwise, this seems like only good news for the US and perhaps the EU. China's artificially propped up currency now comes down to levels that cheapen US debt obligations. What's not to like?

Sure, commodities exporters to China, aka, Australia, must cringe at the thought. Maybe other exports stay flat but reduction in costs for China exports like rare metals will only increase.

I'm sure this will hit China... but other than countries that supply raw materials to China, who is getting hurt? China policies of limiting imports from other countries now comes back to bite them in the ass.

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Re: Some interesting currency moves today

Postby JR8 » Tue, 17 Feb 2015 12:33 pm

Good question, I hadn't considered it (yet). In one sense I've felt that the issue, what ever happens, probably won't really have a material impact on me, beyond what happens to the 3 mining/oil sector stocks I have. But as a very 'LTBH'-er such matters are of little long-term consequence.

But, it always pay to be alert to any potential longer-term issues, so if I come across any 'macro' opinion pieces on it, I will post the links here.
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Re: Some interesting currency moves today

Postby Strong Eagle » Tue, 17 Feb 2015 12:59 pm

I'm having to rethink my question. Perhaps those more knowledgeable than I can chime in. China holds a vast number of US dollars in reserve... we keep sending them over to China to buy their stuff.

In turn, China has invested those excess dollars into US Treasury debt, aka, Treasury bonds. They send the dollars back to the USA in exchange for a note.

So... does the devaluation of the Yuan make any difference with respect to China's investment in US Treasury bonds? US dollars in, US dollars paid in interest, US dollars redeem the bonds... am I missing something here?

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Re: Some interesting currency moves today

Postby Aragorn2000 » Tue, 17 Feb 2015 1:35 pm

Strong Eagle wrote:I'm having to rethink my question. Perhaps those more knowledgeable than I can chime in. China holds a vast number of US dollars in reserve... we keep sending them over to China to buy their stuff.

In turn, China has invested those excess dollars into US Treasury debt, aka, Treasury bonds. They send the dollars back to the USA in exchange for a note.

So... does the devaluation of the Yuan make any difference with respect to China's investment in US Treasury bonds? US dollars in, US dollars paid in interest, US dollars redeem the bonds... am I missing something here?


[guessing]
US could refinance its debt (with China) with the much lower-yield bonds.
[/guessing]

Edited: No it's not true. Lower renminbi would increase US interest rates. Better leave it for the experts to comments :D

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Re: Some interesting currency moves today

Postby Wd40 » Tue, 17 Feb 2015 10:37 pm

Strong Eagle wrote:I'm having to rethink my question. Perhaps those more knowledgeable than I can chime in. China holds a vast number of US dollars in reserve... we keep sending them over to China to buy their stuff.

In turn, China has invested those excess dollars into US Treasury debt, aka, Treasury bonds. They send the dollars back to the USA in exchange for a note.

So... does the devaluation of the Yuan make any difference with respect to China's investment in US Treasury bonds? US dollars in, US dollars paid in interest, US dollars redeem the bonds... am I missing something here?


I dont think falling Yuan makes any difference to their US Treasury holdings.

The main issues with the falling Yuan are :
1)capital flight out of the country which is already happening, one factor being the corruption crackdown. The Chinese elite are probably buying properties abroad.
2)huge amounts of dollar denominated debt that Chinese companies hold, which those companies could default on, if Yuan is devalued and subsequently if the economy doesn't improve.

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Re: Some interesting currency moves today

Postby JR8 » Tue, 17 Feb 2015 11:19 pm

From a respected member on a financial board of which I've long been a member...

---
'I think game being played here is misunderstood. Greece (or the Greeks) owe a lot of money - €320 billion when I last looked - but less than 5% is owed to Greek banks.
The rest almost entirely is owed to three groups:-
a) €zone banks
b) the ECB itself, and
c) the IMF
These three form the troika that Varoufakis and Tsipras are talking to. The members of the troika have no concerns for the Greeks, they represent and are focussed on the well-being of their three constituencies, i.e. the €zone banks, the ECB, and IMF, and in saving these three groups from loss, i.e rescuing them from the consequences of the foolish loans they made.
I don’t think anybody seriously believes that the Greeks will ever repay the €320 billion owed, although the pretence is still kept up. The question is: Who will take the €320 billion ‘hit’?
The game being played out now is: How to re-structure the bail-out so that the ‘hit’ is passed to European tax-payers, i.e. European tax-payers buy the debt from the present three principal holders, and then in due course the loans can be admitted to be “unperforming” – and the three foolish maidens, the €zone banks, the ECB and IMF sail on, unruffled.
Who represents the European taxpayers in these discussions? Who speaks for them? Nobody.

----
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Re: Some interesting currency moves today

Postby JR8 » Wed, 18 Feb 2015 2:58 pm

...following on from the above, that it's not about Greece, it's about saving the Euro and it's key players ... From an article (UK) in the press last night.

'Greece's new government and Eurozone finance ministers butted heads in Brussels on Monday with the meeting ending early as Greek leaders stood firm on their opposition to an extension of their €240bn bailout. The Eurogroup have now failed in the past two meetings to make any progress and the current aid agreement is due to expire at the end of the month.

However, Greek finance minister Yanis Varoufakis said there was still enough time to reach a "very good outcome", ahead of the next meeting on Friday.'


:lol: He's called Germany's number, and got them by the balls, and they know it! :lol:
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Re: Some interesting currency moves today

Postby JR8 » Wed, 18 Feb 2015 3:19 pm

Nikkei 225 just closed at 18,199.17, up 1.18% with a rise of 212.08. Blasting convincingly through the key 18,000 level.

Ok, now, Europe, your turn to pick up where the Nikkei left off!

Ah no silly me, I expect it'll be another day of trying to crush Greece instead... :(
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