G20 treads familiar ground

By Mike Peacock
February 10, 2015

OECD Secretary General Gurria casts his shadow on the podium as he speaks during a news conference in the G20 finance ministers and central bank governors meeting in Istanbul

G20 finance ministers and central bankers meeting in Istanbul will pledge to act decisively on monetary and fiscal policy if needed to combat the risk of  stagnation, according to a draft communique obtained by Reuters last night. As has been customary at these summits, a lot of the discussion implicitly centres on Germany.

Tsipras not for turning

By Mike Peacock
February 9, 2015

Greek Prime Minister Tsipras delivers his first major speech in parliament in Athens

Alexis Tsipras is not for turning, not yet anyway.

Speaking in parliament on Sunday night the new Greek premier said he would not accept an extension to Greece’s current bailout, something the euro zone is urging him to do, and stuck with austerity-ending pledges such as giving free food and electricity to those who need it, reinstating civil servants who had been fired as part of bailout conditions and raising the minimum wage. Privatisations have already been halted.

Major central banks set to go their own way, with some risk

January 9, 2015
Real interest rates of world's major central banks

Real interest rates of world’s major central banks

The world’s major central banks have long followed the same general flight path, guided by the economic winds of growth, inflation and financial markets. It has worked pretty well for policymakers in the United States, Europe, Japan, and the United Kingdom: moving together to tighten or loosen monetary policy makes things more predictable for citizens, businesses and investors. It also serves as buffer to any volatile currency movements, at least among developed economies. But six years after the worst recession in decades, this could be the year central bankers split off and – with some risk – go their own way.

A week before emerging-market turmoil, a prescient exchange on just how much the Fed cares

January 30, 2014

photo

The last seven days has been a glaring example of fallout from the cross-border carry trade. That’s the sort of trade, well known in currency markets, where investors borrow funds in low-rate countries and invest them in higher-rate ones. Some $4 trillion is estimated to have flooded into emerging markets since the 2008 financial crisis to profit off the ultra accommodate policies of the U.S. Federal Reserve, Bank of Japan, European Central Bank and the Bank of England. Now that central banks in developed economies are looking to reverse course and eventually raise rates, that carry trade is unraveling fast, resulting in the brutal sell-off in emerging markets such as Turkey and Argentina over the last week.

China at a crossroads on yuan internationalization project

By Saikat Chatterjee
September 3, 2013

As China marks the third anniversary of the first ever bond sale by a foreign company denominated in renminbi, questions are rife on what lies next for the offshore yuan market.

Latin America: the risks of being too attractive

October 25, 2012

Ironically, an increase of capital inflows to Latin America in the last few years due to unappealing ultralow yields in industrialized countries and the region’s relative economic success is posing a threat for development, according to a recent paper that provides wider background to BRIC criticism of the latest U.S. Federal Reserve´s quantitative easing.

When the euro shorts take off

January 3, 2012

Currency speculators boosted bets against the euro to a record high in the latest week of data (to end December 27) and built up the biggest long dollar position since mid-2010, according to the Commodity Futures Trading Commission. Here — courtesy of Reuters’ graphics whiz Scott Barber, is what happens to the euro when shorts build up:

from Global Investing:

Euro exit-ology

November 8, 2011

Whether or not it's likely or even a good idea, talk of Greece leaving the euro is no longer taboo in either financial or political circles.  What is more, anxiety over the future of the  single currency has reached such a pitch since the infection of the giant Italian bond market that there are many investors talking openly of an unraveling of the entire bloc. But against such an amplified "tail risk",  it's remarkable how stable world financial markets have been over the past few turbulent weeks -- at least outside the ailing sovereign debt markets in question.

from Amplifications:

Why the euro needs to fall

By Kenneth Rogoff
November 3, 2011

By Kenneth Rogoff
The opinions expressed are his own.

Although I appreciate that exchange rates are never easy to explain or understand, I find today’s relatively robust value for the euro somewhat mysterious. Do the gnomes of currency markets seriously believe that the eurozone governments’ latest “comprehensive package” to save the euro will hold up for more than a few months?

from Jeremy Gaunt:

When things stagnate

October 25, 2011

Goldman Sachs researchers have been hitting the history books again, trying to divine what happens to currencies when economies stagnate. Answer:  Not as much as you might think