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Tue, 25th April 2017

Anirudh Sethi Report

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Archives of “foreign exchange market” Tag

Forex reserves increase by $889.4 mn to $369.887 bn

India’s foreign exchange reserves rose by USD 889.4 million to USD 369.887 billion during the week ended April 14, helped by increase in foreign currency assets, the Reserve Bank said.

They had declined by USD 956.4 million to USD 368.998 billion in the previous reporting week.

The reserves 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, surged by USD 881 million to USD 346.248 billion in the reporting week, RBI said.

Expressed in US dollar terms, FCAs 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 unchanged at USD 19.869 billion, the apex bank said.

The special drawing rights with the International Monetary Fund was up by USD 3.1 million to USD 1.446 billion.

India’s reserve position with the Fund, too, rose by USD 5.3 million to USD 2.323 billion, RBI said.

US Treasury decides China isn’t playing with its currency

The U.S. Treasury Department has decided not to label China a currency manipulator in a report published Friday on the foreign exchange policies of America’s key trading partners, backing away from President Donald Trump’s campaign promise to do so.

The move was apparently taken out of consideration for China, which the U.S. hopes will help rein in North Korea’s nuclear and missile programs.

 This was the Trump administration’s first release of the twice-yearly report, which evaluates the foreign exchange policies of major U.S. trading partners.

Although the report did not signal a major shift in Washington’s own currency policy, it is likely Trump will try to use the issue as a bargaining chip in negotiations with other countries. The U.S. may try to limit the dollar’s rise against the yen in its first economic dialogue with Japan, scheduled for Tuesday. Japan’s large trade surplus will probably be high on the agenda.

Trump’s Treasury Department used the same standards for determining currency manipulation as those of the previous administration under President Barack Obama. The report kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a watch list as they met some of the criteria.

Japanese retailers quickly embracing bitcoin payments

Image result for bitcoinTwo Japanese retailing groups soon will accept bitcoin payments, a move that is likely to promote wider use of the virtual currency among domestic consumers.

Electronics chain Bic Camera is teaming up with Tokyo-based bitFlyer, which runs the largest Japanese bitcoin exchange. This Friday, they will begin a trial run of bitFlyer’s bitcoin payment system at Bic Camera’s flagship shop in Tokyo’s Yurakucho district and at Bicqlo Bic Camera, the hybrid outlet with Uniqlo located in Shinjuku.

 Customers are allowed to pay up to 100,000 yen ($904) using the cryptocurrency, and they will also get reward points at the same rate as for cash payments. Bic Camera may introduce the payment system at other locations based on usage trends at the two Tokyo stores.

Recruit Lifestyle, the retail support arm of human resources conglomerate Recruit Holdings, is partnering with another Tokyo bitcoin exchange operator, Coincheck. The virtual currency will become a payment option at shops that have adopted AirRegi, the point-of-sale app developed by Recruit Lifestyle, by this summer.

By using tablets or other devices provided by the store and one’s own smartphone, the customer can deduct the amount on the bill from the designated bitcoin account. Coincheck will convert the bitcoins into yen and transfer the funds to the store.

IMF First China Foreign Currency Report Puts Reserves at $10.8Trln

Yuan banknotes and US dollars are seen on a table in Yichang, central China's Hubei province on August 14, 2015Prior to Friday’s report, IMF currency data was limited to the US dollar, euro, Japanese yen, UK pound sterling, Australian dollar, Canadian dollar and Swiss franc, and an indistinguishable category of “other currencies.”

“With the separate identification of reserves in RMB [Renminbi], eight currencies are now distinguished,” the IMF publication stated.

Chinese holdings of US dollars were $5.1 trillion at the end of 2016, compared with $10.8 trillion in total foreign currency reserves, the report explained.

The remainder was divided among other currencies, with euro holdings the largest at $1.6 trillion, according to the IMF.

Gold Bugs: Why Russia is Stacking Bullion Bricks Like There’s No Tomorrow

Standard 24 karat gold bars being cast in the foundry of the Novosibirsk gold refineryRussia’s Central Bank purchased record amounts of gold in 2016, and plans to accelerate its purchases, retaining its spot as global leader in the growth of gold reserves. That’s according to a recent survey by the GFMS analysts at Thomson Reuters. Russian economists explain the thought process behind the Bank’s purchases.

According to GFMS analysts, Russia’s Central Bank purchased 201 tons of gold in 2016, more than the central bank of any other country. The Bank made its purchases over 11 consecutive months, with purchases accelerating to an average of 36 tons per month between October and November as gold prices fell.

The analysts expect Russia to continue buying large volumes of gold in 2017, predicting about 200 tons in purchases, regardless of fluctuations in gold prices, oil prices and even exchange rates. For comparison, the report estimates the total purchases of gold by other Central Banks to amount to roughly 250 tons for the year.

As of March 1 2017, Russia’s sitting on 1,654.7 tons in gold reserves, making its reserves the sixth-largest in the world, behind the United States, Germany, Italy, France and China.

Commenting on the Central Bank’s moves, economist Valentin Katasonov, professor of the faculty of international finance at the Moscow State Institute of International Relations, told Russia’s Svobodnaya Pressa online newspaper that the Bank is making the right move.

“The Bank is doing the right thing. Specialists know that the today the price of the precious metal is undervalued, and significantly so. Therefore, investors looking for long-term results are investing in gold,” Katasonov said.

“Of course, from the perspective of the short-term investor, such an investment means possible losses. The gold market includes very large speculators, who periodically reduce prices artificially for some period of time, making it possible for interested investors to buy gold at a lower price. But this market also has its own written and unwritten rules.”

Katasonov reiterated that as far as Russia is concerned, the Central Bank’s decision to stock up on gold is almost exclusively beneficial. “Among other things, it allows us to support the domestic gold mining industry, which in the 1990s and the early 2000s faced a very difficult situation. And what is especially insulting is that most of its output at the time went abroad.”

Emerging Markets: An Update

  • Former Korean President Park was arrested.
  • Hungary’s central bank was more dovish than expected.
  • South African President Zuma finally fired Finance Minister Gordhan.
  • Brazil’s meat industry may have seen the worst of the scandal.
  • Banco de Mexico slowed the pace of tightening.
In the EM equity space as measured by MSCI, Colombia (+2.0%), Brazil (+2.0%), and Singapore (+1.2%) have outperformed this week, while Egypt (-1.5%), Turkey (-1.3%), and Poland (-1.2%) have underperformed.  To put this in better context, MSCI EM fell -0.6% this week while MSCI DM rose 0.6%.
 
In the EM local currency bond space, the Philippines (10-year yield -23 bp), India (-16 bp), and Hungary (-11 bp) have outperformed this week, while Turkey (10-year yield +21 bp), the South Africa (+14 bp), and Malaysia (+7 bp) have underperformed.  To put this in better context, the 10-year UST yield was flat at 2.41%.
 
In the EM FX space, RUB (+1.5% vs. USD), PLN (+1.2% vs. EUR), and INR (+0.9% vs. USD) have outperformed this week, while ZAR (-7.9% vs. USD), BRL (-1.4% vs. USD), and TRY (-1.1% vs. USD) have underperformed.

Overnight US Market :Dow closed + 150 points.S&P up 0.73%

S&P up +0.73%. Nasdaq up +0.60. Dow up 0.73%

The major US indices are ending the day with solid gains.
  • The S&P rose by +0.73%
  • The Nasdaq index increased by +0.60% and the
  • Dow industrial average rose by +0.73%.
The S&P index moved below the 50 day MA yesterday but closed back above the MA line. That was the first break since the November election.  Today, the low held above the MA line and also moved above the broken trend line.  The selling seems to be over for now.
In other markets, a snap shot of the major currencies vs each other shows that the AUD is ending the day as the strongest. It rose against all the major currency pairs. The GBP was the weakest.  The GBP tumbled on the day before the triggering of Article 50 tomorrow by PM May.
The USD recovered quite nicely and had strong gains against most currencies with the exception of the AUD (the USD was little changed ag. the CAD).
  • Spot gold was down by -$3.00 to $1251.30
  • WTI Crude recovered to $48.37 (up $0.64)
  • 10 year yield rose to 2.416% up 3. 7 bps

 

Overnight US Market :Dow closed -8.50 points.Nasdaq Unchanged

Nasdaq unchanged.  Dow down about -0.04%

The S&P index is ending the day down about -0.20% on the day to 2273.50. The high reached 2379.55. The low 2369.66.
The Nasdaq was unchanged at 5901.50. The high reached 5915.12. The low 5888.
The Dow was down about 8.5 points to 20906. The high reached 20955. The low extended to 20885.
In other markets:
  • 2 year yield fell -2.6 bp to 1.288%
  • 5 year yield fell -3.1 bp to 1.986%
  • 10 year yield fell -3.7 bp to 2.462%
Spot gold is up $5 to $1234.39. The high reached 1235.78. The low 1229.15.
WTI Crude oil is trading at $48.21, down -$0.57
The snapshot of the major currencies shows the NZD is the strongest while the GBP is the weakest (PM May will trigger Article 50 on March 29th). The USD was mixed with the dollar gaining against the GBP. It was down against the AUD and NZD and little changed against the other major currencies.

WSJ: Investors in Asia turned cautious Friday ahead of a G20

Huh, the Wall Street Journal got that right …

A quiet one … I shoulda let them write the Wrap
Meeting of finance chiefs from the Group of 20
Traders are monitoring how China and Japan will react to pressure from Mr. Mnuchin to strengthen their currencies against the U.S. dollar, said Khoon Goh, head of research for Asia at ANZ. “There is a lot of interest if there will be any material changes out of the G-20,” he said.
US Treasury Sec. Mnuchin is expected to urge China, Japan, Germany and other G-20 members to keep their promise to not use their exchange rates for competitive gains
Link to the Journal, may be gated, but you get the gist.

SNB leaves rates unchanged at March 2017 meeting

Swiss National Bank leaves rates unchanged at March 2017 monetary policy meeting

  • 3 month LIBOR lower target range -1.25%
  • 3 month LIBOR upper target range -0.25%
  • Sight deposit rate -0.75%

All as expected.

  • Will remain active in FX market as necessary
  • Swiss Franc significantly overvalued
  • Swiss forecasts is marked by considerable uncertainty from international risks
  • Raises 2017 CPI forecast to 0.3% vs 0.1% in Dec
  • 2018 CPI 0.4% vs 0.5% prior
  • 2019 CPI 1.1%
  • Maintains 2017 GDP at “roughly” 1.5%