Global Currencies Update

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Dollar steady with eyes on Fed for rate clues; kiwi firmer

Postby NC+ » Wed May 03, 2017 10:51 am

SINGAPORE (Reuters) - The dollar traded below a six-week high against the yen on Wednesday, as the market awaited the Federal Reserve's policy statement for hints on the U.S. interest rate outlook, while the kiwi strengthened after strong New Zealand jobs data.
The Federal Reserve is widely expected to keep interest rates unchanged at the end of its two-day policy meeting on Wednesday, but investors will look to see whether the central bank downplays the recent soft patch in the economy to leave the door open for a rate increase in June.
The dollar last traded at 112.02 yen , still not very far from a six-week high of 112.33 yen set on Tuesday.
The greenback had pulled away from its six-week high after weak U.S. April auto sales data released on Tuesday added to recent worries about the outlook for the U.S. economy, which hit a soft patch in the first quarter.
Market participants may be wary of actively buying the dollar against the yen for now, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
"Concerns about geopolitical risks such as North Korea had weighed on the dollar against the yen recently... But the focus is shifting to whether the (strength) of U.S. economic fundamentals is for real," he said.
The greenback has risen against the yen over the past few weeks as investor risk aversion diminished, helped in part by reduced concerns over geopolitical tensions.
"There is more data coming up including the jobs data, so those need to be watched closely," Okagawa said, referring to the U.S. nonfarm payrolls report due on Friday.
The euro held steady at $1.0930 , trading within sight of a 5-1/2 month high of $1.0951 scaled last week.
The euro saw a relief rally last week, after Emmanuel Macron's victory against anti-euro nationalist Marine Le Pen in the first round of France's presidential elections. The runoff vote is on May 7.
Macron and Le Pen will square off in a televised debate on Wednesday, ahead of Sunday's runoff vote.
Opinion polls still show Macron, a centrist candidate, holding a strong lead of 20 points over Le Pen with just four days to go to the final vote, in what is widely seen as France's most important election in decades.
The euro will probably head higher, especially against the yen, if Macron win's Sunday's vote, said Stephen Innes, senior trader for FX broker OANDA in Singapore.
"Guys just want to see the final outcome and I think they are going to go into euro and I think primarily euro/yen... that's going to be their favorite trade," Innes said.
Under that scenario, the dollar is likely to be supported against the yen as risk sentiment improves, Innes said.
The New Zealand dollar touched a one-week high, after data showed that New Zealand's jobless rate fell close to eight-year lows in the first quarter.
The unemployment rate dropped to 4.9 percent, just above an eight-year low of 4.8 percent hit in the third quarter of 2016.
The New Zealand dollar rose to $0.6969 at one point, its highest since April 25. The kiwi last stood at $0.6947 , up 0.2 percent from late U.S. trade on Tuesday.
The kiwi's gains also came in the wake of a rise in global dairy prices at an international auction. The auction results can affect the New Zealand dollar as the dairy sector generates more than 7 percent of the country's gross domestic product.
https://www.investing.com/news/forex-ne ... her-479559
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Re: Global Currencies Update

Postby voight » Fri May 05, 2017 8:03 pm

Euro flying high into French election weekend

by: Katie Martin - FT

2017_05_eurusd111.png


Investors are heading into the French presidential election this weekend seemingly convinced that centrist Emmanuel Macron will triumph. What can possibly go wrong?

The euro has edged a little lower today, but at $1.0960, it is still around its strongest point since November, with gains this week pinned on Mr Macron’s well-received performance against the far right’s Marine Le Pen in the final televised debate of the campaign. He is leading in the opinion polls by a wide margin.

2017_05_frpoll.png


In the event that he does win, this may mean the market reaction is limited. David Meier, an economist at Julius Baer, writes:

"We expect only a mild positive impact on European equities and limited upside for the euro, as risk discounts had been reduced substantially already following the first round, after the defeated socialist and conservative candidates urged voters to support Macron. Such limited upside could be between 3% and 5%. In case of an unexpected Le Pen win, we expect markets to rattle and European equities to drop up to – 10%, with a nosedive of the euro."

UBS thinks the European Central Bank would step in if Ms Le Pen pulled off a shock victory.

"We believe the ECB’s initial focus would be on the preservation of financial stability. This would imply the provision of liquidity to the Eurozone banking sector, within the central bank’s classical and uncontroversial lender of last resort function. The aim would be to provide sufficient liquidity at a time when risk aversion might lead to problems in interbank funding markets or withdrawals of retail deposits. In doing so, the ECB could go back to the emergency tool box it used extensively during/since the global financial crisis."
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Re: Global Currencies Update

Postby voight » Sat May 06, 2017 11:02 pm

Weekly Forex snap against LKR- 06/05/2017

cur.06.05.png


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- Continuing from last week EUR and GBP recorded gains yet again this week against LKR. EUR surged ahead as investors expect a Emmanuel Macron victory in french election runoff. GBP is also strengthening day by day slowly as they approach their election which conservatives expect to win in a landslide as opinion polls indicates Labour party voters are moving to Lib Dems and UKIP. A surprised win in either election is likely to create a temporary shock wave in world markets and ECB is expected to intervene to stabilize currency markets if so that happens.

- JPY is continuing its downtrend against LKR for another week as LKR appreciates 1% at close of this week.
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Re: Global Currencies Update

Postby NC+ » Sun May 07, 2017 8:50 am

Thanks lot Voight.. :) Doing better than I did.. :-bd
.
Once, voight said he's a regular visitor, today he's the contributor who runs the thread, better than I did.. Feeling happy :)
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voight wrote:Thanks NC for the good work ^:)^ , I am a regular visitor on this thread

LKR gain might have been helped partially by expat remmitances, unless otherwise CB interefered :-w
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Re: Global Currencies Update

Postby voight » Sun May 07, 2017 7:30 pm

Thanks NC ,trying to do my best here. :)

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Euro hits one-year high vs. yen, tops $1.10 on French election relief

Postby NC+ » Mon May 08, 2017 6:16 am

LONDON (Reuters) - The euro topped $1.10 for the first time since the U.S. elections on Sunday and climbed to a one-year high against the safe-haven yen on relief that Emmanuel Macron had beaten the far-right Marine Le Pen to clinch the French presidency.
Early projections showed the market-friendly, pro-EU candidate Macron had been voted in with about 65 percent of the vote, comfortably defeating Le Pen, a nationalist who threatened to take France out of the European Union.
While a victory for Macron had been widely forecast by polls, bookmakers and prediction markets alike, investors nevertheless were relieved that he had won so emphatically.
In early trading in Asia, Europe's common currency rose about 0.2 percent to hit $1.1023 , its highest since Nov. 9.
The euro also climbed as much as half a percent against the yen -- which investors tend to flock to when they perceive high levels of risk -- to hit a one-year high of 124.58 yen (EURJPY=EBS).
The dollar climbed against the Japanese currency as well, hitting a seven-week high of 113.14 yen .
https://www.investing.com/news/forex-ne ... ief-480900
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Re: Global Currencies Update

Postby voight » Sat May 13, 2017 11:22 pm

Weekly Forex snap against LKR- 13/05/2017

curr.13.05.png


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- We witnessed a currency appreciation on LKR this week against EUR and GBP. This can be attribute to a correction after gaining significant grounds for the past few weeks continuously. EUR and GBP is expected to strengthen further in coming weeks. GBP is moving towards pre brexit vote era levels.

- JPY too depreciated marginally against LKR this week and now has fallen over 1% during this quarter.
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Re: Global Currencies Update

Postby voight » Sat May 13, 2017 11:43 pm

Dollar heads for strongest week this year on Fed hike bets

he dollar traded near a three-week high on Friday, on track for its strongest week this year, as robust producer price and labour market data bolstered expectations that the Federal Reserve will raise US interest rates again in June.

A rally to 14-year highs for the dollar, inspired by the election of US President Donald Trump, has fizzled out since the start of this year. The currency has fallen as much as 5 per cent as the pro-growth measures Trump had promised have been called into question.

But despite a wobble earlier in the week after Trump's abrupt firing of FBI Director James Comey - which was suspected to have been driven by political motives - the dollar was up around 1 per cent for the week against its broad index, after reaching a three-week high on Thursday.

That, said analysts, was partly the result of a broad market focus shift away from politics and back towards monetary policy. With investors now pricing in an 80 per cent chance of a Fed rate hike next month, while other central banks continue to ease policy, that could drive the dollar higher.

“Although the market now fully prices in a June hike, theres way too little tightening priced thereafter, in our view,” said BNP Paribas currency strategist Sam Lynton-Brown, in London.

“Currency investors have flipped to a net short position in the dollar... We think that position is vulnerable to an unwind, as market focus shifts from politically driven risk-on or risk-off (sentiment) to monetary policy divergence.”

The euro, which hit a six-month high above $1.10 at the start of the week on relief that the centrist Emmanuel Macron had beaten the far-right Marine Le Pen to become French president, was trading flat at $1.0865, down 1.2 per cent since Monday - its worst week in six.

Data released on Thursday showed new applications for US jobless benefits unexpectedly fell last week, while producer prices rebounded in April, pointing to a tightening labour market and rising inflation.

More US indicators are due later on Friday, including retail sales and the consumer price index for April.

The dollar was flat at 113.81 yen, down from its eight-week high of 114.38 yen reached earlier in the week.

The dollar has gained more than 4 per cent in the three weeks since the first round of the France's presidential elections, with the yen slipping as risk aversion receded.

Yet some analysts say that despite expectations for a Fed rate increase, uncertainty about US growth momentum and concern about the political implications of Trump's dismissal of Comey could limit the scope for near-term gains for the dollar.

“The dollar will probably trade in a 112 yen to 115 yen range for a while,” said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo, adding that it will probably take some time for the greenback to break above 115 yen.

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Re: Global Currencies Update

Postby PAT » Sun May 14, 2017 12:48 am

Thanks voight.....
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Re: Global Currencies Update

Postby NC+ » Mon May 15, 2017 7:57 am

Thanks Voight ... :)
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Re: Global Currencies Update

Postby voight » Sat May 20, 2017 10:59 pm

Weekly Forex snap against LKR- 20/05/2017

curr.20.05.png


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- USD depreciated against LKR this week and so was against most of the currencies this week due to political uncertainty in USA and a surging Euro. SL govt is yet to confirm the materialization of expected forex reserves and if delayed will add on more pressure on to LKR.

- EUR appreciated 2.34% this week and the forecast is to make major gains in coming weeks. JPY too appreciated against LKR this week cutting back the losses incurred on previous couple of weeks.
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Re: Global Currencies Update

Postby voight » Sat May 20, 2017 11:01 pm

Dollar has worst week in over a year amid political uncertainty

By Dion Rabouin | NEW YORK

The U.S. dollar fell on Friday, adding to its worst week since April 2016 against a basket of major currencies, and having surrendered the gains made since Donald Trump was elected U.S. president.

The dollar index, which tracks the greenback against a basket of six world currencies, has shed more than 2 percent this week .DXY. On Friday, it fell 0.75 percent, hitting its lowest since Nov. 9, the day after the U.S. election.

Uproar over Trump's recent firing of FBI Director James Comey, who was overseeing an investigation into possible links between the president's team and Russia, has pressured the dollar.

"The dollar overall, across the board, has been getting beat up this week and a lot of that has to do with the political risk here in DC," said John Doyle, director of markets at Tempus Inc in Washington. "While we saw a little bit of a reprieve yesterday, we’re right back on that dollar weakness train."

The U.S. currency has also suffered from a resurgent euro, which has the largest weighting in the dollar index. The single currency has gained more than 2.5 percent this week, headed for its best performance since February 2016. It rose 0.95 percent on Friday to a six-month high of $1.1205. EUR=

The advance of the euro was spurred by a possible winding down of the European Central Bank's expansive monetary stimulus program, said analysts, with recent data pointing to a robust recovery in the euro zone.

Against the safe-haven Swiss franc, the dollar fell 0.65 percent, touching a six-month low. It was on pace for its largest weekly percentage fall since February 2016.

The dollar fell 0.3 percent against the yen to 111.14 JPY= and had its first weekly drop in five against the Japanese currency.

The dollar moved broadly lower after a report that a senior White House adviser is a person of interest in the investigation into possible coordination between the Trump campaign and Russia.

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Re: Global Currencies Update

Postby PAT » Sat May 20, 2017 11:02 pm

Thanks V......
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Re: Global Currencies Update

Postby NC+ » Sun May 21, 2017 9:19 am

Thanks Voight... :)
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Re: Global Currencies Update

Postby voight » Mon May 22, 2017 11:11 pm

Senegal creates digital currency history
African Business Magazine

senegal-money-8.jpg


The IMF believes that the economy of the West African Economic and Monetary Union (WAEMU), which covers most of Francophone West Africa, remains strong but exhibits increased vulnerabilities. Senegal is embarking on an interesting experiment that could either provide big opportunities or great competition for the nation’s banks.

In December, it became only the second country in the world, after Tunisia, to launch a national digital currency. It will have the same value as the CFA franc and can be stored in all mobile money and e-money wallets. Given current optimism over the country’s economic prospects, these are exciting times for Senegal and Senegalese banking.

Very quietly and with little fuss, Senegal has joined the ranks of Africa’s fast growing economies, alongside Kenya, Tanzania and Côte d’Ivoire. GDP increased by 6.5% in 2016, the fastest rate for 11 years, and the IMF forecasts annual growth of 7% for this year and next.

The government is currently revising the basis on which it calculates its GDP. It previously used 1999 as its baseline but Finance Minister Amadou Ba expects a 30% increase in the size of the economy when the process is completed.

Above all else, Dakar has achieved what few other governments can lay claim to: it has actually done what it said it was going to. The government has slowly reduced its fiscal deficit from 5.5% in 2013 to 4.2% in 2016 and is on track to reach 3% by 2019, which is the medium-term target for the WAEMU. It has also managed to reach its budget targets.

Senegal has the prospect of becoming a significant oil and gas producer in the near future. Kosmos Energy has discovered the Tortue Field with an estimated 15 trillion cu ft of natural gas at present but up to 50 trillion cu ft has been suggested.

This would be sufficient to fuel a huge liquefied natural gas (LNG) plant and provide as much gas as onshore power, fertiliser and cement plants could consume. BP has bought a stake in Kosmos’ Senegalese blocks and so the required investment should now be forthcoming. In addition, Scottish oil company Cairn has already discovered offshore oil reserves.

However, the government must be careful not to replicate Ghana’s recent development. The Ghanaian economy was already growing strongly when hydrocarbons were discovered, apparently putting the icing on what was an already attractive cake.

However, Accra seemed to get ahead of itself in terms of increasing spending too quickly, fuelling both inflation and debt. On 13th April, credit ratings agency Moody’s lifted Senegal’s long-term issuer and senior unsecured debt rating from B1 to Ba and changed the outlook to stable from positive.

World’s second national e-currency

It is against this backdrop that Senegal has followed in the footsteps of Tunisia by launching a new national digital currency. Based on blockchain, the same technology behind bitcoin, the crypto currency has been given the stopgap name eCFA. The new currency will be compatible with other digital cash systems in Africa.

It has been developed by a Senegalese bank, Banque Régionale de Marchés (BRM), and eCurrency Mint. In a statement, the two partners said: “The eCFA is a high-security digital instrument that can be held in all mobile money and e-money wallets. It will secure universal liquidity, enable interoperability, and provide transparency to the entire digital ecosystem in WAEMU.”

In terms of security, the developers say that the currency will be secured by cryptographic protocols to ensure that it cannot be counterfeited. Proponents also argue that such currencies are more transparent and easily regulated by central banks.

To some extent, the eCFA is not as revolutionary as some would believe because of its dependence on the central banking system. The electronic money provided by BRM can only be issued by an authorised financial institution.

Other governments and central banks are contemplating launching their own digital currencies. For instance, the People’s Bank of China plans to issue its own currency based on blockchain.

Why Senegal?

There appear to be two main reasons why Senegal was open to the idea. Firstly, the country is already in an unusual position with regards to its currency. Its CFA franc is shared by 14 countries in West and Central Africa, with its value guaranteed by the French government.

It is therefore used to seeing its currency in a different light to many other countries. The region is also more open to the concept, as the Central Bank of West African States (BCEAO), which serves the countries using the CFA franc, has already drawn up its own e-currency regulations.

Secondly, the concept of technological leapfrogging has become more common in recent years, with proponents arguing that the continent could catch up in developmental terms by bypassing stages of technological development in favour of the latest advances. Dakar and Tunis are therefore open to the idea of alternative, parallel currencies, daring to take the lead on launching them.

The experiment could fail but could also prove revolutionary in a region where most people still lack formal bank accounts. This factor could make the currency more acceptable to potential users than in other parts of the world, as more people use airtime than have traditional bank accounts.

The BCEAO will be responsible for the currency’s distribution in the rest of the region in Phase 2. It is to be distributed in Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger and Togo.

Alioune Camara, the chief executive of BRM, said: “We are committed to bringing digital financial services and true financial inclusion to West Africa. We can now facilitate full interoperability between all e-money payment systems. This is a great leap forward for Africa.”

These are exciting times for Senegalese banking in general. Despite the rise of alternative currencies and methods of accessing bank services, the number of physical bank branches has increased rapidly, from 448 at the start of 2014 to 557 at the start of 2016. There are currently 20 banks in the country, including Banque de l’Habitat du Senegal, Islamic Bank of Senegal and Banque Atlantique.
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Re: Global Currencies Update

Postby voight » Wed May 24, 2017 10:20 am

Euro soars to six-month high as currency is buoyed by strong data and hawkish comments
Gemma Acton - CNBC

104026228-GettyImages-117080257.530x298.jpg


The euro currency leaped to a six-month high on Tuesday following strong production data and hawkish talk from European policymakers.

Emmanuel Macron's decisive victory in this month's French presidential election has underpinned the currency's most recent burst of strength, with his upcoming role as leader of one of the euro zone's largest nations seen as providing a key element of support to the goal of European unity.

The single currency was trading marginally higher against both the U.S. dollar and British sterling by 1 p.m. on Tuesday, having jumped by nearly 7 percent and just under 2 percent against the respective currencies so far this year.

The latest constructive news for the currency came from flash purchasing managers' index (PMI) data which showed the composite figure for the euro zone staying at the six-year high of 56.8 reached in April. The data also indicated that factories were hiring additional staff at the fastest rate on record for the survey.

The currency gave up its gains later in the afternoon after ECB President Draghi said the European Union could lose some of its supervision and oversight of clearing activities once Britain leaves the bloc.

"In a post-Brexit environment, UK financial market infrastructures (FMIs) would be considered as third-country FMIs rather than EU entities," Draghi said.

Yet cautious analysts observed that most of the strength had emanated from France and Germany while growth indications from other euro zone countries in the latest batch of numbers were notably weaker.

Despite the mixed broader output signals, the currency has other newfound pillars to lean upon with German Chancellor Angela Merkel on Monday blaming a "too weak" euro for her country's outsized trade deficit.

In comments to students in Berlin, Merkel pointed the finger at oil prices alongside the currency's exchange rate for Germany's surplus, which has been a source of contention between the Trump administration and her government.

"I interpret Merkel's comment as saying between the lines that the European Central Bank (ECB) policy is just too accommodative for Germany - and its banks who are paying negative interest rates on excess reserves," commented Carl Hammer, head of global macro & FX research at SEB, in an email to CNBC on Tuesday.

ECB President Mario Draghi gave mixed messages to markets in late April when he confirmed that he and his fellow policymakers had not discussed removing the central bank's dovish monetary policy bias at that month's meeting. This accompanied a comment that the recovery was firming with downside risks diminishing - a perspective that was conversely interpreted as more bullish by the markets.

SEB's Hammer believes that the ECB may indicate that the downside risks to growth have fallen still further at its June meeting, although he notes that by then it will be too early to determine whether or not inflation has responded better to improved economic activity.

"Given that the HICP (harmonized index of consumer prices) will hardly be close to its (just below 2 percent) target, should the euro continue higher, the ECB may step up its verbal interventions again," he surmised.

"But it will not happen on this side of 1.15 in EUR/USD," he predicted.

Looking ahead, he expects rangebound trading.

"We expect EUR/USD to now trade in a higher range of $1.10-1.15 with a long-term fair value of approximately $1.15 per euro," said Hammer.

"Very little at this point speaks for a move much above that range unless something more materially negative happens to the U.S. dollar," he concluded.
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Re: Global Currencies Update

Postby voight » Thu May 25, 2017 12:30 pm

Moody's downgrades China, warns of fading financial strength

Moody's Investors Service downgraded China's credit ratings on Wednesday for the first time in nearly 30 years, saying it expects the financial strength of the economy will erode in coming years as growth slows and debt continues to rise.

The one-notch downgrade in long-term local and foreign currency issuer ratings, to A1 from Aa3, comes as the Chinese government grapples with the challenges of rising financial risks stemming from years of credit-fueled stimulus.

"The downgrade reflects Moody's expectation that China's financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows," the ratings agency said in a statement, changing its outlook for China to stable from negative.

China's Finance Ministry said the downgrade, Moody's first for the country since 1989, overestimated the risks to the economy and was based on "inappropriate methodology".

“Moody’s views that China’s non-financial debt will rise rapidly and the government would continue to maintain growth via stimulus measures are exaggerating difficulties facing the Chinese economy, and underestimating the Chinese government’s ability to deepen supply-side structural reform and appropriately expand aggregate demand,” the ministry said in a statement. (For a graphic on China's debt problem click http://tmsnrt.rs/2qfx3lD)

China's leaders have identified the containment of financial risks and asset bubbles as a top priority this year. All the same, authorities are moving cautiously to avoid knocking economic growth, gingerly raising short-term interest rates while tightening regulatory supervision.

At the same time, Beijing's need to deliver on official growth targets is likely to make the economy increasingly reliant on stimulus, Moody's said.

"While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government," it said.

While the downgrade is likely to modestly increase the cost of borrowing for the Chinese government and its state-owned enterprises (SOEs), it remains comfortably within the investment grade rating range.

World stocks inched lower after the move, though Shanghai's main index recouped early losses to end marginally higher.

"After being very much at the front and center of global risk sentiment at the beginning of last year, the Chinese slowdown story has been almost forgotten, with politics throughout Europe and the U.S. taking the limelight," said David Cheetham, chief market analyst at brokerage XTB.

The yuan currency briefly dipped against the U.S. dollar in offshore trading, as did the Australian dollar, often seen as a proxy for China risk.

"It's going to be quite negative in terms of sentiment, particularly at a time when China is looking to de-risk the banking system (and) when there’s going to be some potential restructuring of SOEs," said Vishnu Varathan, Asia head of economics and strategy at Mizuho Bank's Treasury division.



GROWTH TO SLOW

In March 2016, Moody's cut its outlook on China's ratings to negative from stable, citing rising debt and uncertainty about authorities' ability to carry out reforms.

Rival ratings agency Standard & Poor's downgraded its outlook to negative in the same month. S&P's AA- rating is one notch above both Moody's and Fitch Ratings, leading to speculation among analysts that S&P could also downgrade soon.

"We understand the risk and the reason for downgrade, but due to China being a unique system – (with a) closed capital account and strong government control over all important sectors - it can tolerate a higher debt level," said Edmund Goh, a Kuala Lumpur-based investment manager at Aberdeen Asset Management.

The slowing economy has become an increasingly sensitive topic in China, with authorities directing mainland Chinese economists and journalists toward more positive messaging.

Authorities have stepped up efforts over the last several months to curb debt and housing risks, and a raft of recent data has signaled a cooling in the economy, which grew a solid 6.9 percent in the first quarter.

China's potential economic growth was likely to slow toward 5 percent in coming years, but the cooldown is likely to be gradual due to further doses of fiscal stimulus, Moody's said.



DEBT UNDER CONTROL?

The Finance Ministry said continued mid- to high-level economic growth "will provide fundamental support to fend off local government debt risks. China’s government debt risks will not change dramatically in 2018-2020 from 2016."

The state planner, the National Development and Reform Commission (NDRC), said debt risks are generally controllable as measures to lower corporate leverage have achieved initial results, and systemic risks from debt are relatively low.

In a statement on its website hours after Moody's downgrade, the NDRC said China's debt level is not high in absolute terms compared with developed countries such as the United States and Britain, and the growth rate is "clearly" moderating.

"China's debt is mostly domestic," it added. "And our leverage is supported by a high deposit rate (at around 50 percent), (so) the possibility to trigger systemic risks is relatively low."

Government-led stimulus has been a major driver of China's growth over recent years, but has also been accompanied by runaway credit growth that has created a mountain of debt - now standing at nearly 300 percent of gross domestic product (GDP).

Julian Evans-Pritchard, China economist at Capital Economics in Singapore, said steps to resolve the debt overhang, such as debt-for-equity swaps at state companies, were insufficient to deal with problem.

"It’s reached the point where the bad debt problem is just so large the government will have to step in to resolve it at some point, and that obviously means at some point a sizeable increase in government debt," he said.

Moody's said it expects the government's direct debt burden to rise gradually toward 40 percent of GDP by 2018 "and closer to 45 percent by the end of the decade".

A growing number of economists believe that a massive bank bailout may be inevitable in China as bad loans mount.

Last September, the Bank for International Settlements (BIS) warned that excessive credit growth in China signaled an increasing risk of a banking crisis within three years
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Re: Global Currencies Update

Postby NC+ » Fri May 26, 2017 11:10 am

Thanks Voight.. :)
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Re: Global Currencies Update

Postby voight » Sat May 27, 2017 11:07 pm

Weekly Forex snap against LKR- 27/05/2017

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- No major changes occurred this week against LKR, however LKR gained on GBP this week for the fist time in eight weeks, with only 10 days left for UK election opinion polls indicate Jeremy Corbyn's Labour Party has surged dramatically and now within five points of Conservatives.

- During the week SL finance minister and foreign minister swapped their portfolios. We are yet to hear from the new FM his long term plan and vision with regard to finances of the country
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Re: Global Currencies Update

Postby voight » Wed May 31, 2017 1:35 pm

China Moves to Stabilize Currency, Despite Promise to Loosen Control

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China has made a big show of gradually loosening its grip on the value of its currency, an effort meant to mollify critics like President Trump and experts who have long urged Beijing to let markets fix financial problems in the world’s second-largest economy.

Late Friday afternoon, however, the Chinese government said, in effect, “never mind.”

Chinese officials said they were “considering” a change in their procedures that would reinforce their control of the currency — a kind of statement usually indicating a policy had already been approved. The move would essentially bring more short-term stability to China’s financial system, already the subject of renewed focus after Moody’s Investors Service downgraded its credit rating on China’s bonds on Wednesday, citing the country’s mounting debt.

But a move with the currency, the renminbi, would signal that China was retreating from promises it made to the world in recent years to open up its financial system — and many economists say China needs to do that if it wants to continue to grow at a healthy, sustainable pace.

Introducing a ‘Fudge Factor’

The China Foreign Exchange Trade System, which is controlled by the central bank, said it might change the way it sets a value each morning around which the country’s currency is allowed to fluctuate through the day.

Every weekday, the government sets a benchmark value for the renminbi against what is supposed to be a basket of currencies, although the dollar dominates. The renminbi is then allowed to rise or fall in value only 2 percent from the benchmark during the day. That benchmark is supposed to be based on the currency’s value the day before.

On Friday, the government said it was considering introducing a “countercyclical variable.” A better name might be “fudge factor.” It means that the government would no longer have to follow the previous day’s closing price in setting that day’s benchmark.

China does not disclose much about the inner workings of its currency, but some variation of the policy may already be in place. The currency has already settled into trading range at or just below 6.9 to the United States dollar, just below the psychologically important level of 7 to the dollar.

Many Wall Street analysts say the currency should be a bit weaker, though they disagree on the degree. More broadly, many say the renminbi is now closer to its true value than it was in earlier years, when Beijing faced deep pressure from the United States and others to more fairly value the currency.

Market Skepticism Lingers

Starting in the summer of 2015, when China’s stock market crashed and when Beijing shocked the world by abruptly weakening its currency, a lot of money left China. Many in China did not want to hold stocks, bonds or other assets in a currency that was losing value in the broader financial world.

In response, Beijing tightened its already considerable limits on money leaving the country. Still, the potential for the currency to weaken further, amid doubts over China’s debt woes and slowing growth, has lingered over markets.

China’s financial regulators generally do not announce they are considering a shift in something as essential as the value of the currency unless they have already approved it, so the announcement on Friday was widely viewed as a signal to financial institutions, corporations and investors that change was on the way.

For economists and investors, the change would probably bring stability to the currency, at least in the short term. Among the losers, assuming China kept the currency at current rates, would be Chinese manufacturers, who benefit in foreign markets when the currency weakens.

Boon for China, and Maybe Trump

The Chinese government contended that the winners would be Chinese companies and households. Their assets are less likely to rise and fall quickly with ups and downs in financial markets.

But the change to its currency rules would help Beijing too. Since 2015, when the money flight began, China dipped into its vast foreign-exchange hoard to support the currency, reducing that pile of money by an astonishing $1 trillion. That is politically costly for Chinese officials, who once promoted the country’s foreign exchange reserves as the “blood and sweat” of its laborers.

The currency rule change could also reassure the public that the government was firmly in control. In recent weeks, Chinese efforts to rein in some frothy lending caused turbulence in China’s financial markets. President Xi Jinping recently urged the country’s financial regulators to focus on stability.

The country’s political leaders are scheduled to gather in late autumn in Beijing for a Communist Party Congress, an event held only once every five years to review and to some extent adjust the party’s leadership. Few in Beijing want turbulence in the economy or financial markets in the months leading up to the event.

The Trump administration would most likely also be pleased, because although the rule change would amount to Chinese currency manipulation, it would keep China’s currency from weakening. If the renminbi weakened further, it could help Chinese exporters at the expense of American manufacturers.

But the change marks a big step back from China’s goal of turning the renminbi into an international currency like the dollar and the euro. Global investors want their currencies to move predictably along with financial markets, not based on decisions made behind closed doors.

More broadly, it signals that China is not in a hurry to lower its financial barriers with the rest of the world. Those barriers create long-term imbalances that could rattle the global economy if they became severe enough.

Bending a Promise

China loosened currency trading to woo the International Monetary Fund, which rewarded Beijing in the fall of 2015 by agreeing to add the renminbi to a group of global reserve currencies that includes the American dollar. The renminbi actually joined the monetary fund’s elite club of currencies last fall, giving the Chinese currency more credibility.

But the fund most likely would not publicly chastise China if it changed its currency rules. The organization’s general stance has been that China is now such a large player in the world economy, and particularly in global trade, that to ignore its currency would be a mistake.
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Re: Global Currencies Update

Postby voight » Sun Jun 04, 2017 10:27 am

Weekly Forex snap against LKR- 03/06/2017

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- All currencies gained this week against LKR adding further pressure to government backed securities and foreign reserves. GBP continues to rise and getting very close to exceed high of 2016. This may well happen if Theresa May wins on June 8th.

- JPY continued its momentum. It'l be interesting to observe the vehicle market in SL if this rise continues towards 1.45
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Re: Global Currencies Update

Postby voight » Sun Jun 04, 2017 1:13 pm

General Election 2017: Should YOU buy holiday money before the vote?

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The pound has been battered in recent days after polls showed Theresa May's lead over Jeremy Corbyn has dramatically fallen.

Sterling hit multi-week lows against the dollar after polls showed the Conservatives may not breeze to victory on June 8.

Britain's currency has since recovered some of its losses, but is set to see-saw in the days leading up to the election.

But if the Conservatives fail to win a majority in the election, uncertainty would increase - which could put further pressure on the pound, according to experts.

Families heading overseas this summer and worried about sharp drops to the pound could buy some of their holiday currency ahead of the election.

Another option is to buy travel money at today's prices with firms that offer guaranteed buyback deals.

It means travellers can lock in a rate at today's prices, but if the pound travellers can sell their money back at the same rate to buy holiday cash at the more favourable level.

American Express, Travelex and Moneycorp are among the firms that will buyback holiday cash - but some firms limit the time for buyback and there are usually fees for the service.

Alexandra Russell-Oliver, currency markets analyst at Caxton, said: "During times of volatility and around major political events, it can be worth purchasing your holiday money ahead of time or hedging your bets.

"This could involve purchasing half of your currency requirement now and half later.

"That way, you can benefit from the higher exchange rate on at least half of your holiday funds."

Ms Russell-Oliver added: "Additional volatility is likely as sterling reacts to the final opinion polls ahead of the election.

"The race has become much closer as the Conservatives’ lead has narrowed.

"This increased political uncertainty has weakened the pound—in general, markets strongly dislike uncertainty.”
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Re: Global Currencies Update

Postby voight » Fri Jun 09, 2017 3:12 am

Pound Sterling Crashing Against Euro and Dollar as Conservatives Lose Majority According to Exit Poll

The exit poll to the General Election of 2017 has shown the Conservative party has lost its majority in the UK parliament.

The UK Pound is crashing lower as a result with traders believing the UK faces a period of fresh political uncertainty.

We certaintly don't see Theresa May being able to continue in her role should the exit poll be correct.

"Has May’s great gamble failed? If accurate a hung parliament leaves Theresa May’s position as leader in serious doubt and makes the process of Brexit incredibly uncertain," says Neil Wilson, analyst with ETX Capital.

We also struggle to see how the Conservatives would be able to form any kind of coalition.

The impact on the markets are notable.

"The exit poll has certainly produced a shock wave in markets, with disbelief and then a swift drop in the pound in FX markets. The FTSE 100 played catch-up as well, falling below the low of today’s session as traders digested the potential for a hung parliament," says Chris Beauchamp, Chief Market Analyst at IG.

Following the exit poll release, Sterling is as follows:

Pound to Euro exchange rate: 1.1341, down 1.87%
Pound to Dollar exchange rate: 1.2746, down 1.62%
Pound to Australian Dollar exchange rate: 1.6923, down 1.42%

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As we have noted over recent weeks of pre-coverage, the scale of the win matters greatly too with most analysts looking at anything above a majority of 50 as being a good result.

Anything less would be bad for the Pound, and this is what appears to be the case.

"The pound took a tumble on what amounts to a shock exit poll for the financial markets. It’s fair to say the City was pretty confident of a Conservative majority," says Wilson. "A hung parliament throws open all kind of doubts, uncertainty and indecision over the looming challenge of Brexit. We have the possibility of a coalition government and all that entails."

There is the prospect now that Jeremy Corbyn can form a coalition governmen with the likes of the Greens, the SNP and Liberal Democrats.

Losses Could be Short-Term if Labour Form Rainbow Coalition

As noted by Bank of America Merrill Lynch, a coalition government, lead by Labour, could be better for Sterling longer-term in that such a coalition would seek a soft-style Brexit while the excesses of Labour's fiscal policy programme would be kept in check.

Deutsche Bank have also identified a coalition government as being positive for the Pound.

“In the event that the Conservatives dropped below 300 seats, a workable majority between the Labour Party, SNP, the Liberal Democrats, Green Party and Plaid Cymru may be possible,” says analyst Deutsche Bank analyst Oliver Harvey. “The initial market reaction could be to sell the Pound, but the medium term implications would be more bullish.”

It is argued that the support of the SNP, Liberal Democrat, Green and Plaid Cymru parties for a Labour government would be conditional on a ‘soft Brexit’ approach, such as EEA membership, and perhaps a second referendum on EU membership.

Reactions

Once again, it seems as if the British public has decided to surprise everyone.

"Now we have to wait for the results to start coming in, but markets will not like the idea of the Conservatives losing their overall majority," says Beauchamp.

Beauchamp says it is also interesting is the low total for the SNP, which will make life difficult for Labour in forming a coalition with them and the Lib Dems.

"This election has been getting more interesting over the past six weeks, and the uncertainty has just been ramped up more than a few notches," says Beauchamp.


The Exit Poll

The result of a joint BBC, ITV and Sky exit poll shows the Conservatives have lost their majority in parliament.

The survey was taken from 144 polling stations across Britain, asking voters at these stations to mark a mock ballot paper to show how they have voted.

Similar exit polls have correctly predicted who would take the keys to Number 10 in the last five elections, and in 2005 and 2010 came extremely close to predicting the exact number of seats.
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Re: Global Currencies Update

Postby voight » Sun Jun 11, 2017 10:15 am

Weekly Forex snap against LKR- 10/06/2017

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- It was a pretty good week for LKR as it gained against major currencies due to uncertainity of markets in Europe and USA. We will have to wait and see how the UK election and likely impeachment proceedings of US President following James Comey testimony will impact the market.

- CBSL also mentioned that their reserve position has increased following a sovereign bond issue. CBSL further mentioned that currency was not defended using the reserves hence there is a good possibility that SL will end the year with reserve target cooling off pressure on LKR.
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Re: Global Currencies Update

Postby PAT » Tue Jun 13, 2017 11:04 pm

Pound struggles after shock British vote; Tokyo tech sell-off, oil up

The Sterling took a beating on Friday after Prime Minister Theresa May's ruling Conservative Party lost their Westminster majority days before it holds crunch talks with the EU on exiting the bloc.

May called the election three years early in a bid to strengthen her hand in looming Brexit negotiations, but the gamble backfired spectacularly and now she must rely on the support of Northern Ireland's Democratic Unionist Party.

"With May’s leadership teetering on the brink, the UK steps ever so closer to the calamitous Brexit cliff edge scenario," Stephen Innes, senior trader at OANDA, said in a note. "Certainly, prolonged uncertainty would argue for a deeper correction on the Sterling as May’s diminished Brexit mandate scenario plays out."

The pound sank to a seven-week low of $1.2636 at one point on Friday before recovering slightly. In early Asian trade on Monday, it was at $1.2744.

On equity markets, technology firms tumbled in line with losses in New York, where the Nasdaq was dragged down by big losses in big-name firms including Apple, Microsoft and Google's parent Alphabet.

In Tokyo, Sony and Sharp each lost more than one percent, while in Seoul Samsung lost almost two percent. Hong Kong-listed Tencent was 1.4 percent off.

On broader markets, Tokyo ended the morning session 0.4, while Hong Kong was off 0.3 percent and Seoul gave up 0.8 percent. Taipei slipped 0.5 percent, but Shanghai and Singapore were each in the green.

Analysts described the movements as a rotation in which investors were taking profits from highly valued sectors and putting the funds in areas that have underperformed, such as financials, energy and retailers.

Dealers are now waiting for the Federal Reserve's next policy meeting, which ends on Wednesday. While the Central Bank is widely expected to lift interest rates, its post-meeting statement will be pored over for clues about policymakers' plans for future increases and their view on the world's top economy.

The euro edged up slightly as it became clear that the party of new French President Emmanuel Macron was heading for a huge majority after Sunday's first round of voting for the National Assembly.


- Key figures around 0230 GMT -

Tokyo - Nikkei 225: DOWN 0.4 percent at 19,941.80 (break)

Hong Kong - Hang Seng: DOWN 0.3 percent at 25,956.61

Shanghai - Composite: UP 0.1 percent at 3,161.32

Pound/dollar: UP at $1.2744 from $1.2738 at 2050 GMT on Friday

Euro/dollar: UP at $1.1206 from $1.1197

Dollar/yen: DOWN at 110.21 yen from 110.26 yen

Oil - West Texas Intermediate: UP 26 cents at $46.09 per barrel

Oil - Brent North Sea: UP 26 cents at $48.41

New York - Dow: UP 0.4 percent at 21,271.97 (close)

London - FTSE 100: UP 1.0 percent at 7,527.33 (close)
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