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from Breakingviews:

FX business now shares equities’ harsh economics

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Currency trading is taking over from equities as the challenged business in investment banking. Resurgent volatility in foreign exchange markets during September and October is unlikely to offer more than a temporary respite for the business.

Margins in FX have been declining steadily this decade amid the rise of electronic trading. At the same time, a regulatory clampdown has forced banks to switch away from a so-called principal model, acting as a currency wholesaler, to a less lucrative agency model, matching buyers and sellers. An agency-brokered $1 million spot euro/dollar trade generates just $2 in commissions, 90 percent lower than a principal-dealing approach, according to capital markets consultancy GreySpark Partners.

FX trading platforms are expensive to maintain. To cover the cost of equity in the business a bank might need to make $1.3 billion in revenue, according to Greenwich Associates. Only a few will have achieved that last year.

from Breakingviews:

Weaker euro won’t do much to stoke inflation

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The European Central Bank has been egging on the euro’s slide. It has a not-so-secret hope: a cheaper currency will bring some much desired inflation into the euro zone. Good luck.

from Breakingviews:

Scandal will reshape FX trading dynamics

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Around the world, investigators are trying to find out if the largely unregulated foreign exchange market was manipulated. Even before the probes are completed, the pace of change will pick up in the $5 trillion-a-day market, in both what moves currencies and the way business is done.

from Breakingviews:

Dollar to give other currencies beating many want

By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The dollar should make its way back from oblivion in 2014 as the Federal Reserve stops printing greenbacks like monopoly money. Emerging market currencies look vulnerable to a whipping they don’t want, the yen should continue to slide happily, the euro will ease and the pound will end up competing with the dollar at the front of the currency race.

from Breakingviews:

FX increasingly slave to other markets’ moves

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Currencies have been especially tough to call in the past year. New analysis suggests that when global interest rates are uniformly low, moves in the mammoth foreign exchange market seem to be a by-product of what is happening in stocks or bonds. That makes predictions almost impossible.

from Breakingviews:

FX probe shows risks of benchmarks

By Dominic Elliott

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

A regulatory probe into allegations of rigging in foreign-exchange markets shows that the benefits of benchmark rates come with risks. Four investment banks - Barclays, Deutsche, Royal Bank of Scotland and UBS - confirmed on Oct. 29 and Oct. 30 that they were reviewing their FX trading practices. U.S., UK and Swiss regulators all said earlier in the month that they were investigating trading in currency markets. In anticipation of a potential backlash, Royal Bank of Scotland emailed select clients last week to reassure them about its FX rates-setting process, according to a person who has read the email.

from Breakingviews:

The euro’s serene summer may come to an abrupt end

By Swaha Pattanaik

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The euro has been a haven of stability during a summer that has seen government bond yields leap, stocks crumble, and emerging markets slide. But the mood is souring. Some investors are so convinced the currency will weaken against the dollar that they are paying hefty premiums to express their bearishness in the options market.

from Breakingviews:

G7 only adds to global currency confusion

By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The G7 has spoken about the troubled foreign exchange markets, and the world is marginally less secure for it. In Tuesday’s four-sentence statement, the finance ministers and central bankers of the world’s leading economies managed to ignore the problem of inadvertent competitive devaluations, contradict themselves and make an empty promise.

from Raw Japan:

Kimono trader sees no easy money

Japan’s best known retail currency trader, a housewife who made 800 million yen ($9 million) on the dollar, euro and pound, warns there is no such thing as easy money and investors must work hard and educate themselves not to get caught out in the volatile market we see these days.

Nicknamed the “kimono” trader by foreign and Japanese media, 61-year-old Yukiko Ikebe says many retail traders in FX margin trading lost big money late last year when Lehman Brothers collapsed and the yen soared broadly on safety bids.

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