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Tue, 17th January 2017

Anirudh Sethi Report

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Archives of “Bretton Woods system” Tag

Brazil slashes rates by 75bps to 13% in surprise move

Don’t anyone accuse Brazil’s central bank of not being bold.

In a unanimous decision, the bank cut its policy interest rate by 75 basis points on Wednesday, exceeding the consensus call for a 50bps cut and sharply picking up the pace on an easing cycle it began with two back-to-back cuts of 25bps each in October and November

In a statement, the bank said economic activity had fallen below expectations and that a recovery would take longer than previously anticipated.

The size of the cut will be welcomed by many, given the economy’s stubborn refusal to return to growth. The rebound expected by many when congress ditched president Dilma Rousseff last year has failed to happen. GDP contracted by 8 per cent over the past two years under Rousseff’s watch; her pro-growth, market-friendly successor, Michel Temer, was expected to turn things round quickly.

India : Forex Reserves Fall By $935.2 Million To $359.67 Billion

India’s foreign exchange reserves declined by $935.2 million to $359.671 billion in the week to December 23 on account of fall in foreign currency assets, the Reserve Bank said on Friday.

In the previous week, the reserves had fallen by $2.380 billion to $360.606 billion.

They had touched a life-time high of $371.99 billion in the week to September 30, 2016.

Foreign currency assets (FCAs), a major component of the overall reserves, dipped by $933.2 million to $335.970 billion in the reporting week.

FCAs, expressed in US dollar terms, include the effects of appreciation/depreciation of non-US currencies such as the euro, pound and the yen held in the reserves.

Gold reserves remained steady at $19.982 billion in the reporting week, the RBI said.

The special drawing rights with the International Monetary Fund decreased by $0.9 million to $1.427 billion, while India’s reserve position with the Fund too declined by $1.1 million to $2.290 billion, the data showed.

Bitcoin trade volume hits record in November

A record 174.7 million bitcoins changed hands, so to speak, in November, a 50% or so increase from the previous month’s trade volume, according to Bitcoinity.org.

The spike came as Chinese jumped into the digital currency as a way to shift their assets into dollars.

 The previous monthly record, which came in March, was 148.6 million bitcoins.

The November trading volume was worth $137 billion.

The yuan has been weakening against the U.S. currency since Donald Trump’s victory in the presidential election on Nov. 8.

Many Chinese evade restrictions on directly buying dollars by taking a detour into bitcoins. This is what they were doing last month.

China to start direct trading between yuan and 7 more currencies from 12 Dec

PBOC out with the announcement a short while ago 9 Dec

I included it in another post but probably worth a separate mention.

PBOC announces that China will start direct trading between yuan and 7 more currencies from 12 Dec:

  • PLN
  • SEK
  • TRY
  • MXN
  • NOK
  • DKR
  • HUF

CFETS, the part of the PBOC that runs the interbank FX market, says the aim is to facilitate bilateral trade and investment with these countries and lower exchange rate costs.

Previously the US $ has been used to determines the cross rate for the yuan against these ccys.

China Warns It Is Ready To Slow Yuan Plunge On Capital Outflow Fears

It was just one year ago when the biggest worry for the market – which culminated with a near 10% S&P correction in in early 2016 – was the daily plunge in the Yuan driven by the surging dollar, which in turn prompted China to engage in an unprecedented reserve liquidation (in which it sold both government bonds and equities), leading to a daily selloff in risky assets on days when the Yuan was fixed lower.

Fast forward a year later, when the US Dollar has blown through last year’s highs and is now at levels not seen since 2003, the Yuan is trading at record lows, just shy of 7.00, and yet stocks stubbornly ignore the one catalyst that led to so much headache for the bulls one year ago.

 In his daily note, RBC’s cross-asset strategist Charlie McElligott points out that while the market may be oblivious, what is taking place in China is something to be concerned about:
 ONE IMPORTANT TACTICAL MACRO POINT WITH REGARDS TO THE NEAR-TERM DIRECTION OF USTs / GLOBAL LONG-END: The yuan ‘slow bleed’ devaluation by the PBoC versus the USD seen since the start of October has without question been tied to at least some of the weakness in the US long-end, as the central bank sells USTs to try and mitigate the depreciation of the yuan against the SDR basket—see here:

SNB forex reserves end-Oct CHF 630.343bln vs 628.091bln prev

Latest SNB forex reserves report 7 Nov

Increase in FX reserves, decline in gold reserves all supporting the SNB intervention plays

USDCHF 0.9781 near session highs as USD demand and risk-on returns. EURCHF found support at 1.0780 but has run into sellers around 1.0830

 

Russia’s Most Potent Weapon: Rapidly “Hoarding Gold” As Global Currency War Is Upon Us

“He who holds the gold makes the rules?” notes SHTFPlan.com’s Mac Slavo… 

Fresh attempts at containing Russia and continuing the empire have been met with countermoves. Russia appears to be building strength in every way. Putin and his country have no intention of being under the American thumb, and are developing rapid resistance as the U.S. petrodollar loses its grip and China, Russia and the East shift into new currencies and shifting world order.

What lies ahead? It will be a strong hand for the countries that have the most significant backing in gold and hard assets; and China and Russia have positioned themselves very well. Prepare for a changing economic landscape, and one in which self-reliance might be all we have.

As The Free Thought Project’s Jay Syrmopoulos warns, Russia is Hoarding Gold at an Alarming Rate — The Next World War Will Be Fought with Currencies

With all eyes on Russia’s unveiling their latest nuclear intercontinental ballistic missile (ICBM), which NATO has dubbed the “SATAN” missile, as tensions with the U.S. increase, Moscow’s most potent “weapon” may be something drastically different.

The rapidly evolving geopolitical “weapon” brandished by Russia is an ever increasing stockpile of gold, as well as Russia’s native currency, the ruble.

Take a look at the symbol below, as it could soon come to change the entire hierarchy of the international order – potentially ushering in a complete international paradigm shift – and much sooner than you might think.

The symbol is the new designation of the Russian ruble, Russia’s national currency.

Yuan bears out in force as traders look for US Fed rate hike

Reuters reporting yuan bearish bets near 10-month highs 27 Oct

According to the Reuters poll of 21 fund managers conducted between Tuesday and today ( Thursday)

  • bearish bets on China’s yuan hit a near ten-month high in the last two weeks as the central bank guided it weaker to reflect a firm dollar, and sentiment toward most emerging Asian currencies stayed pessimistic with U.S. interest rates expected to rise.
  • bearish positions in the Singapore dollar rose to their largest since October last year.The city-state’s currency slumped last week to its weakest level against the dollar since March 3 on bets that the central bank may ease monetary policy amid growing risk of a recession.

Seems like its not only Japan that’s banking its hopes, and trades, om a US rate hike in December. What happens if they disappoint the masses and hold? Share your thoughts in the comments below.

More from Reuters here

 

India : Forex reserves dip by $1.5 billion to $366.13 billion

India’s foreign exchange reserves declined by USD 1.506 billion to USD 366.139 billion in the week to October 14, due to fall in foreign currency assets, the Reserve Bank said today.

In the previous week, the reserves had decreased by USD 4.343 billion to USD 367.646 billion.

It had touched a life-time high of USD 371.99 billion in the week to September 30, 2016.

Foreign currency assets (FCAs), a major component of the overall reserves, dipped by USD 1.486  .. 

FCAs, expressed in US dollar terms, include the effect of appreciation/depreciation of non-US currencies such as the euro, pound and the yen held in the reserves.

Gold reserves remained steady at USD 21.406 billion, the apex bank said. 

The special drawing rights with the International Monetary Fund declined by USD 8 million to USD 1.468 billion, while India’s reserve position with the Fund dipped by USD 12.8 million to USD 2.356 billion, RBI said. 

Full text of Draghi’s opening statement

Mario Draghi’s opening statement on October 20, 2016 (emphasis is from the ECB)

Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will now report on the outcome of today’s meeting of the Governing Council, which was also attended by the Commission Vice-President, Mr Dombrovskis.

Based on our regular economic and monetary analyses, we decided to keep the key ECB interest rates unchanged. We continue to expect them to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases. Regarding non-standard monetary policy measures, we confirm that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

Today we discussed developments since our last monetary policy meeting in early June. Following the UK referendum on EU membership, our assessment is that euro area financial markets have weathered the spike in uncertainty and volatility with encouraging resilience. The announced readiness of central banks to provide liquidity, if needed, and our accommodative monetary policy measures, as well as a robust regulatory and supervisory framework, have all helped to keep market stress contained. Financing conditions remain highly supportive, which contributes to a strengthening in credit creation. They continue to support our baseline scenario of an ongoing economic recovery and an increase in inflation rates.