LONDON, July 10 (Reuters) – Euro zone money market desks are
feeling the unintended consequences of the European Central Bank
(ECB) cutting its deposit rate to zero.
The ECB’s deposit rate usually acts as the floor for money
market rates and represents a safe haven where banks can park
money with the central bank to avoid counterparty risk – the
risk that a private borrower might prove unable to repay a loan.
LONDON, July 6 (Reuters) – Going short of euros against the
Russian rouble might have some merit after Thursday’s
European Central Bank (ECB) interest rate cut.
The euro has broken below its 200-day moving average (dma)
against the rouble and may be poised to test its 55-dma, which
is currently at 40.1675.
LONDON (Reuters) – Any euro bounce against the dollar exchange rate in the wake of Sunday’s Greek election might be limited with investors and reserve managers ready to sell into a rally.
The harsh reality may be that investors, including reserve managers, take the view that a long, hard road for the euro zone still lies ahead.
LONDON (Reuters) – Once bitten, twice shy Asian central bank reserve managers could steer clear of adding even more euros to reserves as the euro zone crisis lumbers on.
China, with the world’s largest foreign exchange reserves of $3.3 trillion, may be a case in point.
LONDON, June 11 (Reuters) – The European Union-funded rescue
plan for Spain’s debt-laden banks raises as many questions as it
answers and could therefore leave the euro vulnerable.
Sellers of euros are already said to be clustering in
the $1.2650-80 area, looking for a re-test of Friday’s $1.2435
LONDON, May 17 (Reuters) – Foreign exchange traders must be
considering the practical implications for their counterparty
lists if a Moody’s review of 114 European institutions, due by
end-June, results in widespread downgrades.
Some banks may lose business, a smaller number could gain.
Client exposures and risk may become even further concentrated
amongst a limited number of market participants.
LONDON, April 30 (Reuters) – For hedge funds looking for
volatility, an Apple a day might keep profits healthy, but this
leaves big banks’ foreign exchange desks facing thinner pickings
in a market where volumes are flat and trading ranges tight.
Since the beginning of February, Apple shares have
traded up from $455 a share to $644 and down to $555 before
rebounding to Friday’s $603 close in New York. In the same
period, the euro has traded between $1.2970 and $1.3485
- less exciting and potentially far less profitable.
LONDON, April 16 (Reuters) – The dollar’s month-long slide
against the yen may grind to a halt below 80.50 as a combination
of Japanese energy demand rising U.S. rents and technical
factors begin to underpin the greenback.
Of course, many will link the recent slide in dollar/yen to
the decline in two-year U.S. bond yields, to 0.275
percent on Monday, that gathered pace after April 6′s
disappointing U.S. non-farm payroll data.
LONDON, March 12 (Reuters) – Tighter credit poses a big
challenge to foreign exchange desks, which are already seeing
their profit margins shaved to the bone as e-commerce platforms
force them to quote ultra-competitive prices.
The end result could spell trouble for the foreign exchange
industry and mean that its daily turnover – currently $4
trillion – struggles to grow at the pace seen in recent years.
– Neal Kimberley is an FX market analyst for Reuters. The opinions expressed are his own –LONDON (Reuters) – An article in Britain’s Independent newspaper on Tuesday rightly attracted a lot of market attention with its provocative heading “The demise of the dollar.” While subsequent and almost co-ordinated denials from numerous capitals have taken the steam out of the story, the dollar’s role is again under scrutiny.While the geopolitical realities of the Middle East would arguably rule out the re-pricing of oil in non-dollar currencies at this time, that may change in the future.Alarmist conclusions that the dollar is on a swift road to ruin are wide of the mark. The road will be long and at its end the dollar will not be ruined, but it will be less important.The dollar remains, however, on the back foot as the story resonated with a market that was already looking for an excuse to unload the greenback. Sovereign reserve managers, working for future generations, will have taken note. These stories add to the uncertainty of holding vast sums of dollars in trust.It has long been the fate of reserve currencies to depreciate and be displaced. Global reserve currency status has always encouraged the beneficiary nation or empire to live beyond its means, safe in the knowledge that the rest of the world must hold its currency to pay for goods and commodities. The Roman dinar, the Spanish reale and most recently the British pound are all examples of currencies that have gradually lost their reserve status in this manner.The key point is that the process is gradual. Displacement occurs in baby steps, small incremental developments which eventually create an unstoppable momentum. When the European Community first posited the idea of the single currency, the markets (particularly in London) sneered. Yet the euro was born and has prospered.The dollar is entering a process of critical examination. This will take years, probably decades. Sterling retained significant world reserve status throughout the first half of the 20th century, despite clear signs economic primacy had shifted to the United States and despite the crushing financial weight of participation in two world wars.One newspaper article is not a game-changer, but it is a reminder that the dollar’s position is under the microscope.The market remembers only too well the suggestions of China’s Central Bank Governor Zhou Xiaochuan in March 2009. He said then that the world should consider adopting the Special Drawing Right, a basket of dollars, euros, sterling and yen, as a super-sovereign reserve currency.The Chinese suggestion was a baby step toward change but the U.S. reaction was telling. Treasury Secretary Timothy Geithner said he had not read the proposal but added, “As I understand it, it’s a proposal designed to increase the use of the IMF’s Special Drawing Rights. I am actually quite open to that suggestion.” A masterful piece of political deflection but the market recognized the Chinese intent.Even more recently, in September, the United Nations Conference on Trade and Development issued a report calling for a new global reserve currency.It’s like the dripping of a tap. Across the world, institutions, governments and the media are wearing away at the dollar’s dominance. Central banks managing billions of dollars of reserves are not immune to these incremental developments.In the past, Japanese officials characterized the best moment for intervention to be when they could “go with the wind.” In the current debate, reserve managers will consider that a light breeze is blowing against the dollar. They will make a measured and appropriate response. Marginal adjustments in reserves would increase the non-dollar component.The Independent story may have been denied but it chimed with the market. It wasn’t the first such story and it won’t be the last. With the United States perceived to be living beyond its means and facing the challenges of rapidly rising economic and political rivals, the debate will continue. But it will be a long, long debate, and the effects on the value of the dollar will be incremental, not precipitate. To paraphrase Mark Twain, rumors of the dollar’s sudden death have been greatly exaggerated.(Editing by Nigel Stephenson)