foreign exchange – Ardud http://ardud.ro/ Sat, 16 Apr 2022 05:30:30 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://ardud.ro/wp-content/uploads/2021/05/default1-150x150.png foreign exchange – Ardud http://ardud.ro/ 32 32 Caution remains in Forex market after rate hike https://ardud.ro/caution-remains-in-forex-market-after-rate-hike/ Sat, 19 Mar 2022 01:33:48 +0000 https://ardud.ro/caution-remains-in-forex-market-after-rate-hike/ The dollar is getting strong again Fed and BOE rate hikes Stocks rally to end week high The U.S. dollar today regained some of the strength it had lost in the previous 48 hours as the foreign exchange market assessed the impact of rate hikes alongside ongoing problems between Russia and Ukraine. . Both issues […]]]>

The U.S. dollar today regained some of the strength it had lost in the previous 48 hours as the foreign exchange market assessed the impact of rate hikes alongside ongoing problems between Russia and Ukraine. . Both issues will weigh heavily on the direction of the market heading into the weekend, although other major currencies have managed to break out of a previously very weak position against the dollar. Meanwhile, Wall Street relied on gains from previous days of bullish trading to take a positive stance for the weekend.

A stronger dollar repels

More optimism from those trading the forex in recent days has seen the dollar lose some of the resolute strength it had built up in recent weeks. The US dollar index, which measures the strength of the currency against a basket of other major currencies, is trading around 98.00 and down more than 1% on the week, but it remains a high level for the index and still indicates an extremely strong dollar.

Part of the reason for the return to the safe haven dollar is likely the lack of any concrete breakthrough in the negotiations between Russia and Ukraine. Indications and tone on both sides have become more positive but this has not yet led to a ceasefire or any other step towards ending the invasion. The forex market reacted cautiously and remained focused on this news throughout the day with little hard-hitting data released.

Rate hikes digested by traders

This week, the Federal Reserve and Jerome Powell finally signed into law the long-awaited first interest rate hike. This 25 basis point increase appears to be the first of several to come this year, although the tone of policymakers has been decidedly more dovish than many had expected.

In the United Kingdom, the Bank of England followed suit in the United States with a rate hike of 25 basis points. However, this increase was accompanied by a more cautious outlook for the future of the economy. Acknowledging this, the pound struggled to find buyers and fell back near 1.31.

Largely positive week on Wall Street

Wall Street traders are moved to Friday in view of their best week on several streets. It comes as they capitalized on the positivity of the week which had seen gains of almost 5% for the S&P 500. It turned out to be the best week since the end of 2020 for the index as it added new gains of more than 1%.

The other two major US indices also ended very positive weeks. The Dow Jones was up almost 5% for the week before the start of the day, while the tech-heavy NASDAQ, which has suffered more than others lately, had posted gains of almost 6%. over the week. The two rallied to add to their positive momentum.

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Week Ahead – Central Banks https://ardud.ro/week-ahead-central-banks/ Sat, 12 Mar 2022 02:50:42 +0000 https://ardud.ro/week-ahead-central-banks/ Rate hike expected as inflation continues to rise The week was once again volatile in financial markets, with events in and around Ukraine continuing to dominate. Sentiment still dominates the headlines and huge uncertainty remains around the outcome of the talks between Ukraine and Russia and the sanctions imposed on the latter by the West. […]]]>

Rate hike expected as inflation continues to rise

The week was once again volatile in financial markets, with events in and around Ukraine continuing to dominate. Sentiment still dominates the headlines and huge uncertainty remains around the outcome of the talks between Ukraine and Russia and the sanctions imposed on the latter by the West.

This in turn creates enormous uncertainty about the global economic outlook, with soaring commodity prices posing a massive downside risk to growth and an upside risk to inflation. Central banks were already between a rock and a hard place before the invasion as they sought to control inflation without hurting the post-pandemic recovery. Soon they may be forced to choose between inflation and recession.

The ECB chose to proceed as planned and announced a reduction in asset purchases which could lay the groundwork for rate hikes later this year or next. The Fed and BoE are expected to do the same with rate hikes expected next week. The CBRT is expected to leave rates unchanged again, while the CBR is much more unclear after opting to more than double its key rate to 20% in response to Western sanctions a few weeks ago.

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The Fed is expected to finally start tackling inflation by ending QE and hiking rates by a quarter point next week. Given the impact of the war in Ukraine, inflation is expected to continue to warm over the next two months, which should keep the pressure on the Fed to raise rates.

Investors will pay particular attention to the February retail sales report which should show that the consumer is still managing the current price spikes.

EU

Russian forces are stepping up their attacks on Ukraine even as negotiations continue between the two countries and Putin reports that progress is being made. The invasion remains the biggest risk to the region’s economic outlook, as the ECB alluded to this week.

However, it will start to reduce its asset purchases in order to face record levels of inflation. Markets are still expecting increases of 30 to 40 basis points this year. We will have an inflation update next week when the final HICP data comes out on Thursday.

UK

The Bank of England is widely expected to raise interest rates again on Thursday – the third consecutive 25 basis point increase – and will likely pave the way for at least another at the following meeting. The risks to the outlook are clearly on the downside, but inflationary pressures are strong and the central bank is determined to rein in domestic forces before it’s too late.

Labor market data will also be released on Tuesday, with the earnings component likely to be the most important aspect given central bank concerns over domestically generated inflation.

Russia

The CBR raised interest rates to 20% a few weeks ago, from 9.5% previously, in response to tough sanctions imposed by the West. Since then, the currency has continued to struggle and is not too far off its lows. Sanctions continue to hit Russia and the central bank may have no choice but to raise rates again, either next week or anytime between meetings, depending on how the situation evolves. situation.

Putin has indicated that the talks are going in the right direction, but the attacks are intensifying so we can take his words with a grain of salt.

South Africa

The rand recovered some of its declines in recent days in line with reversals in risk appetite. However, it remains vulnerable to sharp declines again, with events in and around Ukraine remaining a dominant force for the currency. Unemployment and retail sales data will take center stage next week.

Turkey

The pound has been sensitive to market risk appetite in recent weeks, with soaring commodity prices amid already sky-high inflation understandably a major concern. It is trading at its lowest level since mid-December against the dollar.

Next week, the central bank’s decision will be the highlight. The CBRT will obviously not back down and the direction of travel will ultimately depend on its monetary policy review. Rates are expected to remain at 14% this month.

China

Chinese stocks are under pressure as US-listed ADRs fall dramatically on US delisting fears and regulatory headwinds in the country. Complicating the picture is the huge jump in commodity and energy prices, with the government urging state refiners to halt April exports to preserve domestic supplies. With risk sentiment also being tested due to Ukraine, slowing economic activity and a slowing property market, Chinese equities remain vulnerable to further selling.

USD/CNY remained pegged around 6.33 as authorities seemed content with yuan strength, perhaps with an eye on soaring import bills from China.

China released its fixed asset investment, retail sales and industrial production on Tuesday along with soft data that again raised negativity around a Chinese slowdown.

Also keep an eye on the number of Covid-19 cases in China, which has soared to 1,000 cases per day. Other major lockdowns could be in the works as they keep Covid-zero.

India

India’s inflation rate expected on Monday carries upside risks, and Tuesday’s trade balance poses downside risks, as Ukraine-induced turmoil in commodity markets threatens the recovery of the economy. ‘India.

With Chinese equities slumping, it looks like speculative money has once again turned to Indian equities, supporting both stock and currency markets last week.

Near-term market direction will be dominated by headlines from the Russian-Ukrainian conflict.

Australia

The Aussie dollar held onto most of its gains recently, despite choppy trading, thanks to the huge jump in commodity prices. The flows of feelings have taken precedence over the natural resources of this lucky country. Australia releases jobs data on Thursday, which is always good for some intraday volatility for the AUD.

Resources aside, equities remain at the mercy of the ebbs and flows of Eastern European headlines.

New Zealand

New Zealand is releasing its fourth quarter GDP and current account this week, but both are old news in the context of market developments.

The NZD has, like the AUD, endured choppy trading but is maintaining its gains as a base currency, albeit only an agricultural one. It therefore remains more vulnerable than the AUD to fluctuations in sentiment.

Japan

Japan releases Reuters Tankan, Machinery Orders and Inflation this week, but none will have a significant impact on markets, with BOJ officials signaling conditions in the economy are not yet there to the point where the monetary stimulus can be reduced. This leaves USD/JPY at the mercy of the US/Japan rate differential which widened sharply last week pushing USD/JPY above 116.00.

Japanese equities, dominated by rapid cash flows, had a tough week, almost exactly following the direction of US markets. They remain entirely at the mercy of swings in sentiment, although fears of a recession in import prices would temper any gain anyway.

Economic calendar

Monday March 14

Economic data/events

  • India CPI
  • France trade
  • Trade of Russia
  • New Zealand housing sales, net migration
  • wholesale prices in india
  • BP Annual Energy Outlook

tuesday march 15

Economic data/events

  • Chinese industrial production, liquidity operations
  • CPI Poland
  • CPI France
  • Euro area industrial production
  • India Trade Data
  • UK unemployment rate
  • Unemployment rate in South Africa
  • Sales of existing homes in Canada, housing starts
  • New Zealand Performance Services Index
  • Australian Consumer Confidence, House Price Index
  • China real estate investment, year-to-date retail sales, jobless survey
  • Expectations from the ZEW survey in Germany
  • Mexico’s international reserves
  • US cross-border investment, empire making, PPI

Wednesday March 16

Economic data/events

  • FOMC decision: Should raise interest rates by 25 basis points
  • U.S. retail sales, trade inventories
  • Release of RBA Minutes
  • IPC Canada
  • UK Chancellor Sunak answers questions from MPs
  • CPI Italy
  • Retail sales in South Africa
  • New Zealand BoP
  • Australia Leading Index
  • New house prices in China
  • Extraordinary Meeting of NATO Defense Ministers
  • UK Treasury updates its forecast for the economy
  • Capacity utilization in Japan, industrial production, trade, department store sales
  • EIA Crude Oil Inventory Report

Thursday March 17

Economic data/events

  • US Housing Starts, First UI Claims, Industrial Production
  • Eurozone CPI
  • BOE rate decision: expected to raise rates by 25bps to 0.75%
  • Central Bank of Turkey (CBRT) Rate Decision: Expected to Keep Rates at 14.00%
  • Registrations of new cars in the euro zone
  • Unemployment in Australia
  • New Zealand GDP
  • Singapore electronics exports, non-oil domestic exports
  • Japan Machinery Orders, Bloomberg Economic Survey
  • Trade of Spain
  • ECB President Lagarde, Executive Board Member Schnabel, Governing Council Member Visco and Chief Economist Lane speak at the ‘The ECB and its Observers’ conference at Goethe University in Frankfurt.

Friday 18th March

Economic data/events

  • BOJ Rate Decision: Expected to keep policy unchanged
  • The Central Bank of Russia (CBR) should meet: should keep rates stable
  • U.S. Conference Board Leading Index, Existing Home Sales
  • Fed’s Barkin speaks at the Maryland Bankers Association’s First Friday Economic Outlook Forum
  • Britain’s Prime Minister Johnson speaks at the Conservative Party’s two-day Spring Conference
  • U.S. National Weather Service Releases Spring Flood Assessment
  • Trade Italy
  • Retail sales in Canada
  • Japan Tertiary Index, CPI
  • Thailand futures, foreign exchange reserves, car sales

Sovereign Ratings Updates

  • – Belgium (Fitch)
  • – Belgium (S&P)
  • – Spain (S&P)
  • – European Union (Moody’s)
  • – Greece (Moody’s)
  • – Greece, (DBRS)
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Lebanese c.bank denies halting operations on FX platform https://ardud.ro/lebanese-c-bank-denies-halting-operations-on-fx-platform/ Wed, 09 Mar 2022 14:09:00 +0000 https://ardud.ro/lebanese-c-bank-denies-halting-operations-on-fx-platform/ A view shows the Central Bank building, in Beirut, Lebanon, November 12, 2020. REUTERS/Mohamed Azakir Join now for FREE unlimited access to Reuters.com Register BEIRUT, March 9 (Reuters) – Lebanon’s central bank on Wednesday denied that its official foreign exchange platform had halted operations after the value of the country’s pound fell on the parallel […]]]>

A view shows the Central Bank building, in Beirut, Lebanon, November 12, 2020. REUTERS/Mohamed Azakir

Join now for FREE unlimited access to Reuters.com

BEIRUT, March 9 (Reuters) – Lebanon’s central bank on Wednesday denied that its official foreign exchange platform had halted operations after the value of the country’s pound fell on the parallel market.

The bank said it continues to provide dollars without caps at the official rate announced on the platform. It has intervened to keep the pound broadly stable near this rate since mid-January.

The currency was changing hands at 22,000/22,500 to the dollar on the parallel market, a market participant said, compared to 20,200 reported by the central bank’s Sayrafa platform on Tuesday. It was previously down to 23,000.

The Lebanese currency has lost more than 90% of its value since Lebanon sank into a financial crisis in 2019. It had fallen to 34,000 before the start of central bank intervention.

Although the currency has all but collapsed, the official peg of 1,500 pounds to the dollar, introduced in 1997, remains in place – one of several officially recognized exchange rates.

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Reporting by Tom Perry; Written by Mahmoud Mourad; Editing by Edmund Blair and John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

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How rising exchange rates could affect U.S. investments https://ardud.ro/how-rising-exchange-rates-could-affect-u-s-investments/ Thu, 03 Mar 2022 20:04:46 +0000 https://ardud.ro/how-rising-exchange-rates-could-affect-u-s-investments/ Last month, the Bank of Jamaica (BOJ) adjusted its monetary policy to tackle inflation, which had exceeded the target. In January 2022, the inflation rate of 9.7% remained above the upper limit of the central bank’s target range. And that should continue over the next 10 to 12 months. So how will this affect long-term […]]]>

Last month, the Bank of Jamaica (BOJ) adjusted its monetary policy to tackle inflation, which had exceeded the target.

In January 2022, the inflation rate of 9.7% remained above the upper limit of the central bank’s target range. And that should continue over the next 10 to 12 months.

So how will this affect long-term investments for those trading in the US market?

Eugene Stanley, vice president of fixed income and foreign exchange at Sterling Asset Management, shares his thoughts on rising exchange rates and BOJ monetary policy.

“As to how this will affect an investor in the United States, I am not particularly convinced that it will make a big difference. The truth is that the United States, like many other countries and markets around the world, is also facing rising inflation. Other central banks are also taking steps to raise rates to try to curb inflation,” he said.

So that translates to higher returns on U.S. dollar assets, Stanley noted.

“This is also happening here where we are seeing higher returns on Jamaican dollar assets as the central bank has been forced to raise its policy rate to deal with the inflation situation,” he added. .

Sterling Asset Management is a full-service financial planner, fund manager and global securities trader focusing primarily on US dollar-denominated fixed income securities. The company partners with leading brokerages to connect investors to the global capital market, offering attractive returns for medium to long-term investments, including global US dollar bonds and mutual funds.

The BOJ would have accelerated its rate of hike – it raised its key rate by 150 basis points to bring its signal rate to 4%, but given that the Jamaican authorities are still targeting inflation between, say, 4 and 6% , the United States is aiming for inflation of around 2%.

According to Stanley, what this means for investors is that the value of the Jamaican dollar, given the inflation differential, can be expected to depreciate on an annual basis between 2% and 4%. .

The tougher BOJ measures are also aimed at addressing expanding liquidity in Jamaican dollars and maintaining stability in the foreign exchange market.

Stanley applauded the BOJ’s policy to deal with the situation, warning: “They have to try to contain inflationary impulses for sure, but what I want to guard against is the need to be ultra – aggressive in trying to contain inflation. I don’t think the central bank wants interest rates to return to the kind of levels we’ve seen in the past it would certainly undermine the growth the economy has enjoyed in recent years.

Although US authorities have yet to raise interest rates, they have signaled their intention to do so and have already significantly reduced liquidity support to their banking sector.

“Looking at the US market, that means there is less money available to chase financial assets, so invariably with higher interest rates, asset prices are likely to fall. This not only includes bonds which have an inverse relationship with interest rates, but also equities, as future cash flows are discounted at higher interest rates and result in lower valuations.

So, generally speaking, prices of financial assets will fall as interest rates rise in the United States.

“But ultimately, once interest rates stabilize, it will also provide opportunities for investors and they can acquire assets at prices far below what they would otherwise have,” Stanley added.

Stanley advised US dollar investors not to worry too much about current market volatility as markets fluctuate over time, but urged investors to remain vigilant.

He continued, “As long-term investors can tell you, short-term volatility doesn’t necessarily translate into low long-term returns. They favor long-term performance because it means that when there is a market pullback, a long-term investor can acquire assets at a cheaper value and thus improve the potential returns of their portfolios. Long-term investors can ride out market declines without having to sell assets.”

When the US dollar is strong, it reflects a robust US economy. On the other hand, a weak dollar can signal an economic slowdown, rising inflation, or both.

The US dollar is the world’s main reserve currency and will therefore be affected by developments in other markets.

“For example, if there is good news in Europe, the euro will strengthen against the dollar. It is difficult to develop an investment thesis based solely on the strength of the US dollar. Whether the dollar is strong or no, it shouldn’t deter investors from thinking about their future I think the most important thing is to determine whether or not this investment in US dollars achieves their hurdle rate and also compensates them for the level of risk that they are about to take,” Stanley pointed out.

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How a Russian-Ukrainian conflict could affect global markets By Reuters https://ardud.ro/how-a-russian-ukrainian-conflict-could-affect-global-markets-by-reuters/ Sat, 19 Feb 2022 12:40:00 +0000 https://ardud.ro/how-a-russian-ukrainian-conflict-could-affect-global-markets-by-reuters/ © Reuters. FILE PHOTO: A member of the Ukrainian State Border Guard Service patrols the area near the border with Russia in Chernihiv region, Ukraine February 16, 2022. REUTERS/Valentyn Ogirenko By Karin Strohecker LONDON (Reuters) – A possible invasion of Ukraine by neighboring Russia would be felt in a number of markets, from wheat and […]]]>

© Reuters. FILE PHOTO: A member of the Ukrainian State Border Guard Service patrols the area near the border with Russia in Chernihiv region, Ukraine February 16, 2022. REUTERS/Valentyn Ogirenko

By Karin Strohecker

LONDON (Reuters) – A possible invasion of Ukraine by neighboring Russia would be felt in a number of markets, from wheat and energy prices to the region’s dollar sovereign bonds and safe havens. and stock markets.

Below are five charts showing where a potential escalation in tensions could play out in global markets:

1/SHELTERS

A major risk event usually sees investors rush into bonds, generally considered the safest assets, and this time may be no different, although a Russian invasion of Ukraine is likely to push bonds even higher. oil prices – and therefore inflation.

Inflation at multi-decade highs and impending interest rate hikes caused a temperamental start to the year for bond markets, with US 10-year rates remaining near the key 2% level and 10-year yields German years above 0% for the first time since 2019.

But an outright conflict between Russia and Ukraine could change that.

In the foreign exchange markets, the euro/Swiss franc exchange rate is considered the main indicator of geopolitical risk in the euro zone, as the Swiss currency has long been considered by investors as a safe haven. At the end of January, it reached its highest levels since May 2015.

Gold, also seen as a shelter in times of conflict or economic turmoil, clings to 13-month highs.

(Chart: Safe haven price as tensions in Ukraine rise – https://fingfx.thomsonreuters.com/gfx/mkt/byprjxggmpe/Global%20markets%20and%20Ukraine%20tensions.PNG)

2/ CEREALS AND WHEAT

Any interruption in the flow of grain out of the Black Sea region is likely to have a major impact on prices and further fuel food inflation at a time when affordability is a major concern worldwide at the aftermath of the economic damage caused by the COVID-19 pandemic.

Four major exporters – Ukraine, Russia, Kazakhstan and Romania – ship grain from Black Sea ports that could be disrupted by any military action or sanction.

Ukraine is expected to be the world’s third largest exporter of maize in the 2021/22 season and the fourth largest exporter of wheat, according to data from the International Grains Council. Russia is the world’s largest wheat exporter.

(Graphic: Rising food prices are fueling inflationary pressures – https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnwkkwvq/Rising%20food%20prices%20fuel%20inflation%20pressures.PNG)

3/ NATURAL GAS & OIL

Energy markets risk being affected if tensions turn into conflict. Europe depends on Russia for about 35% of its , mainly through pipelines that run through Belarus and Poland to Germany, Nord Stream 1 that goes directly to Germany, and others through Ukraine.

In 2020, gas volumes from Russia to Europe plummeted after lockdowns suppressed demand and did not fully recover last year when consumption surged, helping to send prices to record highs .

As part of possible sanctions if Russia invades Ukraine, Germany has said it may shut down the new Nord Stream 2 gas pipeline from Russia. The pipeline is expected to increase gas imports to Europe, but also underlines its energy dependence on Moscow.

Analysts expect Russia’s natural gas exports to Western Europe to be significantly reduced via Ukraine and Belarus in the event of sanctions, saying gas prices could return to fourth-quarter levels.

Oil markets could also be affected by restrictions or disruptions. Ukraine transports Russian oil to Slovakia, Hungary and the Czech Republic. Ukraine’s transit of Russian crude for export to the bloc was 11.9 million metric tons in 2021, down from 12.3 million metric tons in 2020, S&P Global (NYSE:) Platts said in a statement. note.

JPMorgan (NYSE:) said the tensions risked a “significant spike” in oil prices and noted that a rise to $150 a barrel would reduce global GDP growth to just 0.9% annualized in the first half. , while more than doubling inflation to 7.2%.

(Chart: European gas prices hit record highs in December – https://fingfx.thomsonreuters.com/gfx/mkt/lbpgnwqrwvq/European%20gas%20prices%20hit%20record%20highs%20in%20December%20Updated .PNG)

4/EXHIBITION OF THE COMPANY

Listed Western companies could also feel the consequences of a Russian invasion, although for energy companies any hit to revenue or profits could be somewhat offset by a possible spike in oil prices.

Britain’s BP (NYSE:) has a 19.75% stake in Rosneft, which accounts for a third of its output, and also has a number of joint ventures with Russia’s biggest oil producer.

Shell (LON:) has a 27.5% stake in Russia’s first LNG plant, Sakhalin 2, which accounts for a third of the country’s total LNG exports, as well as a number of joint ventures with state energy giant Gazprom (MCX:).

US energy company Exxon (NYSE:) operates through a subsidiary, the Sakhalin-1 oil and gas project, in which Indian explorer Oil and Natural Gas Corp also has a stake. Equinor of Norway is also active in the country.

In the financial sector, risk is concentrated in Europe.

Austrian Raiffeisen Bank International earned 39% of its estimated net profit last year from its Russian subsidiary, Hungarian OTP and UniCredit about 7% of theirs, while Societe Generale (OTC:) generated 6% of net group profits through its Rosbank retail operations. Dutch financial firm ING also has a footprint in Russia, though that’s less than 1% of net profit, according to JPMorgan’s calculations.

In terms of lending exposure to Russia, French and Austrian banks are the largest among Western lenders with $24.2 billion and $17.2 billion, respectively. They are followed by US lenders at $16 billion, Japanese banks at $9.6 billion and German banks at $8.8 billion, according to data from the Bank for International Settlements (BIS).

Other sectors are also exposed: Renault (PA:) generates 8% of its EBIT in Russia. Metro AG’s 93 Russian stores in Germany generate just under 10% of its sales and 17% of its core profit while Danish brewer Carlsberg (OTC:) owns Baltika, Russia’s largest brewer with a share of market of nearly 40%.

(Chart: European banks most exposed to the Ukraine crisis – https://fingfx.thomsonreuters.com/gfx/mkt/zdpxoaldyvx/European%20banks%20most%20at%20risk%20from%20Ukraine%20crisis.PNG)

5/ BONDS AND REGIONAL CURRENCIES IN DOLLAR

Russian and Ukrainian assets will be at the forefront of any market fallout from a possible military action.

Dollar bonds from both countries have underperformed their peers in recent months as investors reduced exposure amid growing tensions between Washington and its allies and Moscow.

Ukrainian bond markets are primarily the domain of emerging market investors, while Russia’s overall position in capital markets has shrunk in recent years due to sanctions and geopolitical tensions, somewhat mitigating any threat of contagion through these canals.

However, the Ukrainian and Russian currencies also suffered, with the hryvnia being the worst performing emerging market currency so far this year and the ruble the fifth biggest.

The situation between Ukraine and Russia presents “substantial uncertainties” for currency markets, said Chris Turner, global head of markets at ING.

“Events in late 2014 remind us of the liquidity shortfalls and US dollar hoarding that led to a substantial decline in the ruble at that time,” Turner said.

(Chart: Russia and Ukraine bonds are feeling the heat – https://fingfx.thomsonreuters.com/gfx/mkt/gkplgjrgnvb/Russia%20and%20Ukraine%20bonds%20are%20feeling%20the%20heat.PNG )

(Reporting and graphics by Karin Strohecker, Sujata Rao, Danilo Masoni, Mike Dolan, Nigel Hunt and Susanna Twidale; Writing by Karin Strohecker; Editing by Alison Williams, Catherine Evans and Christina Fincher)

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FOREX-Euro jumps as record inflation adds pressure on ECB https://ardud.ro/forex-euro-jumps-as-record-inflation-adds-pressure-on-ecb/ Wed, 02 Feb 2022 12:54:56 +0000 https://ardud.ro/forex-euro-jumps-as-record-inflation-adds-pressure-on-ecb/ Band Joice Alves LONDON, February 2 (Reuters) – The euro appreciated for the third day in a row on Wednesday, break away a 20-month low last week as eurozone inflation hit a new record high last month, fueling bets that the European Central Bank could raise interest rates sooner than expected. At 5.1% in January, […]]]>

Band Joice Alves

LONDON, February 2 (Reuters)The euro appreciated for the third day in a row on Wednesday, break away a 20-month low last week as eurozone inflation hit a new record high last month, fueling bets that the European Central Bank could raise interest rates sooner than expected.

At 5.1% in January, price growth is more than double the ECB’s 2% target.

The euro has fallen nearly 8% in three months, rattled by expectations that the ECB will be the last major central bank to raise interest rates after ignoring inflation for months and arguing that factors temporary contracts were behind the rise.

The euro strengthened 0.45% against the dollar at $1.13245, touching a nine-day highas investors weighed the chances of the ECB signaling a faster lane for policy tightening at its Thursday meeting.

Ulrich Leuchtmann, head of foreign exchange at Commerzbank, said the money market was now pricing in an ECB rate hike for the final quarter of the year.

In the short term, the impact on the euro will depend on what ECB President Christine Lagarde has to say on Thursday, he said.

“Some market participants will expect the ECB to look hawkish tomorrow,” Leuchtmann added.

Shaun Osborne, chief currency strategist at Scotiabank, said the ECB was in an “uncomfortable position” but he expected it to stick to its no-hike forecast this year, ” which will remain a brake on the euro”.

In the meantime, the dollar fell from a 19-month high reached against a basket of currencies =USD last week as US Federal Reserve officials warned of potentially aggressive rate hikes this year.

A chorus of Fed officials said it would raise interest rates in March but spoke cautiously about what might come next, indicating a desire to keep options open given the uncertain inflation outlook.

The dollar fell for a third day against its peers, slipping 0.4% to 95.875, with a rally in global equity markets undoing some of its safe-haven allure.

The pound rose 0.3% to hit a 12-day high against the dollar at $1.3571 ahead of a Bank of England policy meeting on Thursday.

Investors fully priced in an expected BoE base rate hike of 25 basis points to 0.5% on Thursday. BOWATCH

euro against dollarhttps://tmsnrt.rs/3L3om7P

(Reporting by Joice Alves editing by David Goodman, Frank Jack Daniel and Chizu Nomiyama)

((Joice.alves@thomsonreuters.com; twitter to @joiceal))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Explaining Lebanon’s financial crisis and how it happened By Reuters https://ardud.ro/explaining-lebanons-financial-crisis-and-how-it-happened-by-reuters/ Sun, 23 Jan 2022 08:21:00 +0000 https://ardud.ro/explaining-lebanons-financial-crisis-and-how-it-happened-by-reuters/ 3/3 © Reuters. A damaged ATM is pictured in Beirut, Lebanon March 17, 2021. REUTERS/Mohamed Azakir/File Photo 2/3 By Edmond Blair (Reuters) – Lebanon is in the grip of a deep economic crisis after successive governments racked up debt following the 1975-1990 civil war, with nothing to show for their spending spree. Banks, at the […]]]>
3/3

© Reuters. A damaged ATM is pictured in Beirut, Lebanon March 17, 2021. REUTERS/Mohamed Azakir/File Photo

2/3

By Edmond Blair

(Reuters) – Lebanon is in the grip of a deep economic crisis after successive governments racked up debt following the 1975-1990 civil war, with nothing to show for their spending spree.

Banks, at the heart of the service economy, are paralyzed. Savers were denied access to dollar accounts or told that the funds they had access to were now worth a fraction of their original value. The currency collapsed, plunging part of the population into poverty.

WHERE IS IT WRONG?

Lebanon’s financial collapse since 2019 is the story of how a vision of rebuilding a nation once known as the Switzerland of the Middle East was derailed by mismanagement as a borrowed sectarian elite with few constraints.

Downtown Beirut, leveled during the civil war, rose, with skyscrapers built by international architects and chic shopping malls filled with designer boutiques that accepted payment in dollars or Lebanese pounds.

But Lebanon had nothing else to show for a mountain of debt equivalent at the time to 150% of national production, one of the highest burdens in the world. Its power plants cannot supply electricity 24 hours a day and Lebanon’s only reliable export is its human capital.

HOW DID HE BORROW ALSO?

Some economists have described the Lebanese financial system as a nationally regulated Ponzi scheme, where new money is borrowed to pay off existing creditors. It works until the fresh money runs out. But how did the nation of around 6.5 million people come to this?

After the civil war, Lebanon balanced its books with tourism receipts, foreign aid, income from its financial industry and largesse from the Gulf Arab states, which funded the state by bolstering the bank’s reserves. central.

One of its most reliable sources of dollars was remittances from millions of Lebanese who went abroad to find work. Even during the global financial crash of 2008, they sent money home.

But remittances began to slow from 2011 as Lebanon’s sectarian infighting led to greater political sclerosis and much of the Middle East, including neighboring Syria, descended into chaos. .

Sunni Muslim states in the Gulf, once reliable supporters, have begun to turn away due to Iran’s growing influence in Lebanon, via Hezbollah, a heavily armed Lebanese Shiite group whose political power has grown.

The budget deficit soared and the balance of payments sank deeper into the red as transfers failed to match imports of everything from basic foods to flashy cars.

That was until 2016, when banks started offering remarkable interest rates for new deposits in dollars – a currency officially accepted in the dollarized economy – and even more extraordinary rates for deposits in Lebanese pounds. .

Elsewhere in the world, savers got tiny returns.

Given that the Lebanese pound had been pegged to the dollar at 1,500 for more than two decades and could be freely exchanged at a bank or by a supermarket cashier, what was there to lose?

The dollars flowed again and the banks were able to continue financing the expenses.

HOW CAN BANKS OFFER SUCH HIGH RETURNS?

Lebanon was still politically dysfunctional and rivalries had left it without a president for most of 2016.

But the central bank, the Banque du Liban, headed by former Merrill Lynch banker Riad Salameh since 1993, introduced “financial engineering”, a range of mechanisms that amounted to offering banks lavish returns for new dollars. . According to the bankers, it was a tactic that might have been appropriate if followed quickly by reforms – but not if, as it was, not enough happened.

The improvement in dollar flows translated into an increase in foreign exchange reserves. What was less obvious – and is now a point of contention – was an increase in passives. By some accounts, the central bank’s assets are more than wiped out by what it owes, so it can be sitting on big losses.

Meanwhile, the cost of servicing Lebanon’s debt has soared to around a third or more of budget outlays.

WHAT TRIGGERED THE COLLAPSE?

When the state needed to limit spending, politicians splurged on a public sector wage increase ahead of the 2018 elections. And the government’s failure to implement reforms meant foreign donors held back billions of dollars in aid they had promised.

The latest spark of unrest came in October 2019 with a plan to tax WhatsApp calls. With a large diaspora and Lebanon’s low tax regime skewed in favor of the wealthy, imposing a fee on how many Lebanese stayed in touch was disastrous.

Mass protests, led by a disenchanted youth demanding sweeping change, erupted against a political elite, including aging militia leaders who thrived while others struggled.

Currency inflows dried up and dollars left Lebanon. Banks ran out of dollars to pay depositors queuing outside, so they closed. The government also defaulted on its external debt.

The currency collapsed, slipping from 1,500 to the dollar before the crisis, to an exchange rate of around 23,000 at the end of January 2022, after hitting 34,000 earlier in the month.

To compound the problems, an explosion in August 2020 in the port of Beirut killed 215 people and caused billions of dollars in damage.

After a rapid economic contraction, public debt, by some estimates, was 495% of gross domestic product in 2021 – far higher than the levels that crippled some European states a decade ago.

WHAT HAPPENS NOW?

France has led international efforts to push Lebanon to fight corruption and implement the reforms demanded by donors. A new government was formed at the end of 2021, promising to relaunch talks with the International Monetary Fund. It has not yet implemented any significant reform policy.

Basically, politicians and bankers need to agree on the magnitude of the huge losses and what went wrong, so that Lebanon can change direction and stop living beyond its means.

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Sri Lanka’s CCP demands end to ruling circular debt amid forex crisis https://ardud.ro/sri-lankas-ccp-demands-end-to-ruling-circular-debt-amid-forex-crisis/ Sat, 15 Jan 2022 03:06:35 +0000 https://ardud.ro/sri-lankas-ccp-demands-end-to-ruling-circular-debt-amid-forex-crisis/ ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation is seeking to end the island’s electric utility “circular debt” as utility losses from price controls land on the oil company as an unpaid debt. Sri Lanka faces sporadic power outages in January as the utility runs out of fuel with a 300-megawatt coal-fired power station out […]]]>

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Petroleum Corporation is seeking to end the island’s electric utility “circular debt” as utility losses from price controls land on the oil company as an unpaid debt.

Sri Lanka faces sporadic power outages in January as the utility runs out of fuel with a 300-megawatt coal-fired power station out of commission, while its debt to the CPC rises due to losses.

Losses are then financed by borrowing from state banks or suppliers.

Circular debt

Energy utility debt increases every time the Central Bank prints money to keep interest rates low, which also causes currency shortages and eventually the currency to collapse, adding to losses and endless “state enterprise price reforms”.

In countries with loose dollar pegs that print money and run into currency crises and end up in the International Monetary Fund, “circular debt” between oil and power utilities and electric utilities and independent power producers continues to accumulate in each credit cycle.

Utilities losses mount as the Fed prints money and drives up energy prices under loose policy. As the Fed later tightens policy, a loosely pegged central bank’s currency plummets, adding more losses to electric and oil utilities.

Energy prices are then raised as part of “state enterprise price reforms” and two to three years later the central bank prints money again to keep rates low and the rupee falls back , driving endless “price reforms” amid currency crises.

In the absence of the political will or knowledge to reform the central bank to curtail the arbitrary powers of the Monetary Board to keep rates low, the cycle keeps repeating itself, with the currency peg typically breaking down whenever the US Federal Reserve tightens its policy – which is usually every 4-5 years.

Pakistan and Sri Lanka, who have the worst central banks in the region are the main victims of circular debt.

Sri Lanka is once again facing a shortage of foreign currency as money is printed to keep interest rates at 6.0%, half of the 12.1% inflation seen over the past 12 month ending December 2021.

Most of the money is now printed to sterilize foreign exchange market interventions to remove fuel and other items (giving reserves for imports).

Sri Lanka’s central bank inflation is currently just that of the State Bank of Pakistan.

Related

Sri Lanka inflation soars as modern monetary theory demon roars

In Sri Lanka, however, the losses now come mainly from the electricity sector and not from the fuel sector, which has seen two price increases, despite the current administration coming to power on the basis of a promise to fix fuel prices.

Sri Lanka’s electricity regulator has failed to raise Ceylon Electricity Board tariffs or put in place a mechanism to pass on higher fuel costs when liquid fuel power plants are used or global prices increase.

Sri Lanka has also blocked a cheaper coal-fired power plant, in part encouraged by renewable energy campaigners, undermining the utility’s long-term generation plan and plunging the country into crisis, critics say.

The lack of price increases in recent years to compensate for the loss of the coal-fired power plant has further strained the CEB’s finances.

In an unusual cascading policy mistake, repeated in Sri Lanka, CPC has in the past funded its losses with dollar debt when the central bank prints money to create currency shortages, the utility also being prohibited from buying dollars.

As a result, the CPC has suffered massive “Nick Leeson losses” every time the currency crashes due to money printing. During the 2018 money printing cycle, it racked up dollar debt when the central bank printed money and a massive foreign exchange loss when the rupee crashed.

Energy prices

Unlike the regulated CEB prices, the CPC whose prices are under the control of the Treasury made multiple price hikes as money printing depreciated the rupee and world prices rose in the meantime.

In the past, the CPC has also maintained the fixed price of heating oil at the CEB, when world prices have fallen.

The CEB has payment arrears of 91 billion rupees to Ceylon Petroleum Corporation.

“In April-May 2020, the CEB had to settle around Rs 86 billion for the fuel it purchased,” CPC Chairman Sumith Wijesinghe told reporters.

“With the Covid situation, the Ministry of Finance provided 50 billion rupees to the CEB to settle its debts. The CEB used some of this money to settle the debt to us and with this the debt decreased to around 41-45 billion rupees in 2020.

“But in 2021, with the amount they bought on credit, they now have a debt of 91 billion rupees to CEYPETCO. We discussed how they can fix this. But now we are discussing how to get the diesel to the CEB.

Wijesinghe said that, despite the debt, CEYPETCO will supply the amount of diesel needed to generate electricity for the next four days; however, they have asked the CEB to provide money to buy the diesel they want in the coming weeks.

“Today, to import a liter of diesel, it costs 146 rupees. But we sell it at 121 rupees even for CEB. So we have a loss of Rs 25 per liter when selling,” Wijesinghe said.

“The CEB also operates at a loss when it sells electricity. So they have to calculate how much money is needed to import diesel and the loss that the two public companies will suffer.

Wijesinghe said CEYPETCO supplies 1,500 metric tons of diesel per day for power generation.

No original plan

However, the state-run Ceylon Petroleum Corporation said CEB did not initially request heating oil in January 2021. CPC had previously closed its refinery saying heating oil was not needed .

“CEB’s plan for January 2022 was to generate electricity through hydropower, solar wind and coal,” Ceylon Petroleum Corporation Chairman Sumith Wijesinghe told reporters.

“It was their expectation. However, with the sudden outage of the Norochcholai coal-fired power station, 300 megawatts of power was lost to the main grid.

“To achieve this, they had to start the Kelanitissa power station. This is why the demand for fuel has increased.

Sri Lanka has faced sporadic power outages as fuel from the Kelanissa combined cycle power plant ran out. On Tuesday, a gas turbine also tripped due to suspected low fuel pressure.
(Colombo/ January 14, 2021)

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The message for South Asia https://ardud.ro/the-message-for-south-asia/ Sat, 01 Jan 2022 20:25:37 +0000 https://ardud.ro/the-message-for-south-asia/ [ad_1] In March 2014, Male decided to close his high commission office in Dhaka due to the reduction in the annual budget. At that time, Dhaka offered to pay the rent for the Maldivian Embassy office and take care of other local official expenses in Dhaka. Although the Maldives politely rejected this offer, it does […]]]>


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In March 2014, Male decided to close his high commission office in Dhaka due to the reduction in the annual budget. At that time, Dhaka offered to pay the rent for the Maldivian Embassy office and take care of other local official expenses in Dhaka. Although the Maldives politely rejected this offer, it does imply the closeness and depth of relations between these two South Asian countries.

Recently, the Prime Minister of Bangladesh, Sheikh Hasina, and his entourage completed their first six day visit in the Maldives 6n the invitation of the President of the Maldives Ibrahim Mohamed Solih. It is the need of the hour to analyze the meaning of this visit and to deepen the message it conveys.

The visit of the Prime Minister of Bangladesh to this island country reflects the importance he attaches to this bilateral relationship as a long-standing friend. It is an effort on the side of Bangladesh to deepen ties with the countries of South Asia that is necessary for the country’s aspiration to become a “middle power”. But there are many critical issues, equally important to both countries, that could have been addressed to make the visit more successful. As the two countries have similar religious values, cultural practices and development aspirations, they should have declared a clearly defined plan on how they will cooperate with each other in the coming days to bring the links to a new one. plan of the bilateral equation.

The diplomatic relations journey between Bangladesh and the Maldives began on September 22, 1978. Since then, the two countries have enjoyed a warm bilateral relationship with cooperation in trade, investment, security and military assistance. In order to encourage bilateral trade, the Government of Maldives removed the duty on Bangladeshi products in 2011. And this translates into an increase in Bangladeshi exports, especially pharmaceuticals, to the Maldives. Many Bangladeshi migrants, about 70,000 to 80,000, work in the Maldives as expatriates who directly contribute to Bangladesh’s foreign exchange reserves. During the covid-19 pandemic, the Bangladesh Navy sent more than 100 metric tons of food and pharmaceutical products in the Maldives and the Bangladesh Air Force actively participated in the covid-19 vaccination program in 2021.

The visit of the Prime Minister of Bangladesh to the Maldives is important not only for Bangladesh and the Maldives, but also for other countries in South Asia, for a number of reasons. First, this visit will strengthen existing bilateral relations on trade, connectivity, investment, agriculture, information and communication technologies, human resource development, culture and community well-being, because the leaders of the two States maintain dialogues attaching the utmost importance to these questions. Second, the signing of a memorandum of understanding for the recruitment of qualified health professionals will open a career window for the practitioners concerned. On the one hand, it will generate foreign exchange for Bangladesh by creating jobs for Bangladeshi healthcare professionals and on the other hand, it will improve the entire healthcare sector in Maldives. And this is how it will create a win-win situation for both countries.

Third, the Double Tax Elimination Agreement will ensure that honest taxpayers do not have to pay tax in two countries for the same income. This will effectively promote FDI in both countries by motivating foreign investors. Fourth, Bangladesh has donated 13 military vehicles, as a sign of friendship, to the Maldives, which will enhance security cooperation and strengthen brotherly ties between the security forces of those countries. Fifth, Bangladesh signed an agreement to provide a loan of $ 200 million to the Maldives during the visit. This is the second time that Bangladesh has lent to a country, after Sri Lanka, which once again proves the economic growth and financial power of Bangladesh in this region. Besides, it also shows how to hold hands of close friends during their critical moments.

Sixth, the decision to cooperate in youth and sports development will go a long way in improving this sector by encouraging young people to actively participate in sports and by sponsoring local sports related organizations. Seventh, from now on, citizens of Maldives will benefit from visa-free entry to Bangladesh, which will not only increase interpersonal connectivity, but also increase trade volume and promote Bangladesh tourism sector. Eighth, the agreement on the transfer of “sentenced prisoners” will also help these countries to bring the perpetrators back to their lands for justice. Finally, the Prime Minister of Bangladesh declared that Biman Bangladesh Airlines is ready to launch air connectivity with the Maldives, which will increase bilateral trade and investment and subsequently have a positive long-term impact on the livelihoods of the inhabitants. of these countries.

This century is remarkable for minimizing geographic distance by removing visible and invisible trade barriers. As “maritime neighbors”, Bangladesh and the Maldives may have discussed a free trade agreement (FTA) to remove tariff and non-tariff barriers to bilateral trade that artificially impede the free flow of goods and services. services. In addition, they could have designed a roadmap to improve “maritime connectivity” by creating opportunities for the Maldives to use different seaports in Bangladesh. The two countries may have strengthened their cooperation to obtain the optimum return from the “blue economy” by using marine resources such as oil, gas, sand, fish, seafood, minerals, sand and other resources. gravel, renewable energies, etc. As climate-vulnerable countries, they could have planned to work together to address the climate crisis.

The visit of the Prime Minister of Bangladesh to this island country reflects the importance he attaches to this bilateral relationship as a long-standing friend. It is an effort on the side of Bangladesh to deepen ties with the countries of South Asia that is necessary for the country’s aspiration to become a “middle power”. But there are many critical issues, equally important to both countries, that could have been addressed to make the visit more successful. As the two countries have similar religious values, cultural practices and development aspirations, they should have declared a clearly defined plan on how they will cooperate with each other in the coming days to bring the links to a new one. plan of the bilateral equation.

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Swiss National Bank cancels third quarter foreign exchange purchases https://ardud.ro/swiss-national-bank-cancels-third-quarter-foreign-exchange-purchases/ Fri, 31 Dec 2021 08:36:00 +0000 https://ardud.ro/swiss-national-bank-cancels-third-quarter-foreign-exchange-purchases/ [ad_1] A general view of the Swiss National Bank (SNB) building in Zurich, Switzerland, December 16, 2021. REUTERS / Arnd Wiegmann Register now for FREE and unlimited access to Reuters.com Register ZURICH, Dec.31 (Reuters) – The Swiss National Bank spent 2.79 billion Swiss francs ($ 3.05 billion) in foreign currency during the third quarter, data […]]]>


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A general view of the Swiss National Bank (SNB) building in Zurich, Switzerland, December 16, 2021. REUTERS / Arnd Wiegmann

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ZURICH, Dec.31 (Reuters) – The Swiss National Bank spent 2.79 billion Swiss francs ($ 3.05 billion) in foreign currency during the third quarter, data showed on Friday, representing a decrease of its interventions despite the continued rise in the value of the safe haven. .

This figure is lower than the 5.44 billion francs spent by the SNB between April and June and also lower than the 10.97 billion francs spent in the third quarter of 2020, according to central bank data.

During the three months of July to September, the franc appreciated 1.6% against the euro, and has since been pushed even higher after attracting investors looking for safe-haven assets.

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Currency interventions, along with negative interest rates, are cornerstones of the SNB’s battle to stem the strengthening of the Swiss franc. The bank recently reiterated its commitment to the interventions. Read more

A stronger Swiss franc threatens to undo the SNB’s goal of achieving price stability in Switzerland by lowering the price of imports, while it hurts the country’s economy by raising the price of Swiss exports .

But the apparent low level of currency purchases has prompted economists to speculate that the SNB has become more reluctant to contain the franc as it climbs in value. Read more

Analysts also said the SNB seems more comfortable with the recent appreciation of the franc, as the fall in Swiss inflation relative to inflation in the euro area reduces the real effect of nominal appreciation by the currency.

“The low level of foreign exchange intervention in the third quarter indicates that the SNB was little concerned about the development of exchange rates in the third quarter,” said Karsten Junius, economist at J.Safra Sarasin.

“In the fourth quarter, we expect a higher level of currency intervention. During this period, the CHF has appreciated 5% against the euro alone – which is a speed of adjustment which is clearly too quick for the comfort of Swiss exporters and therefore also for the SNB. “

($ 1 = 0.9145 Swiss francs)

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Reporting by John Revill; Editing by Alison Williams and Gareth Jones

Our standards: Thomson Reuters Trust Principles.

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