Deutsche Bank AG, which was charged last May for FOREX market rigging, is suspected of another case of currency fixing. This time the affected currencies are from Argentina, Brazil and Russia. This report came from classified sources but a bank spokesperson did not give any statement.
Probes are being conducted to determine which banks filed to settle previous FOREX-related cases.
Banks in Moscow and some other countries are under watch for influencing benchmark rates of currencies in emerging markets. The Russian ruble was also sought out by the Commodity Futures Trading Commission (CFTC) during past settlements including one that involved Barclay’s Bank which did refused to comment on said issue.
The CFTC examined a particular rate for the ruble according to traders’ submissions during resolutions of foreign exchange rigging investigations in 2014. The banks concerned were UBS, JP Morgan, HSBC, RBS, and Citigroup.
The Commission focused on a benchmark that the Emerging Markets Trade Association (EMTA) and CME Group
Incorporated created during the 1889s. Since then, it has been utilized as reference for derivatives. The CME Group operates the biggest futures exchange in the whole world.
CFTC also said Barclays tried to manipulate this benchmark during the #400 million resolution made this year. The bank’s unlawful activity was done by traders in several places which included Moscow.
Prosecutors still expect these banks to cooperate with the investigation for immediate resolution of pending cases.
The US dollar dropped versus the common currency and low-yield euro as investors refused to bet against currencies often used to fund uncertain carry trades.
With carry trades, traders sell low-yielding currencies to buy riskier but higher-yielding notes for higher profits. Investors are likely to avoid unstable assets once instability happens in financial markets worldwide and stocks collapse.
The FTS Euro First 300 shares index registered its worst performance for the month since August of 2011 incurring a nine percent loss as Fed policymakers appear inclined to increase interest rates soon.
Japanese and Chinese stock markets were down along with Wall Street indexes (around 0.80 percent during late trading in New York.
The US dollar index declined 0.16 percent which was close to 1.5 percent lower in August although it was above a seven-month trough of 92.621 one week ago as prospects of a China slowdown sent stocks plummeting.
USD gave up 0.13 percent to 121.23 Japanese yen and went down around two percent for this month but still above the seven-month decrease of 116.15 one week ago. The euro went up 0.3 percent to $1.1225 which is below the high of $1.1715 last week although it remains 2.4 percent up in August month.
The US dollar touched 0.44 percent versus the Swiss franc (0.9672 CHF) and under 0.31 percent against the UK pound sterling at $1.534.
USD and CAD pair touched 1.3298 during but the pair later consolidated at 1.3296 and climbed 0.73 percent.
The pair found support at 1.3163 which was a high in August 26.
A market survey released on Sunday revealed the strong US currency is pushing Aussie gold production and protecting local traders from adverse consequences of a worldwide sell-off in gold bars.
Production in Australia increased by four percent during Q2 to 72 tons compared to the previous quarter which is just second to China.
The price of bullion in AUD terms has been relatively stable since the beginning of this year. Devaluation of the Aussie dollar is turning out to be a stroke of luck for local gold producers notwithstanding reduced gold prices in USD.
The Aussie dollar averaged roughly $1, 532 (Australian) for every ounce even if average price of the yellow metal was US$1, 192 per ounce in the second quarter.
Gold output of Australia until June 30 went up one percent to 285 tons which is worth approximately US$10.05 billion based on today’s rates.
China could have produced around 450 tons in 2014.
The impending interest rate hike has reduced the allure of non-interest assets which include precious metals. Hence, gold recorded its most significant decline for the week in five weeks following release of economic statistics from the US which pointed to steadier growth.
Nonetheless, Aussie gold was still impressive.
A CEO from a leading international mining firm said his company allotted almost $574 million to procure mines in this country in 2015. He reported an increase of 112 percent profit for FY 2015.
The balance sheet remains stronger while the price of gold at $100 higher (AUD) per ounce was higher compared to 2014.
The Venezuelan Central Bank will circulate paper money in higher denominations in 2016 as unrestrained inflation reduced the value of a 100-bolivar bill to only 14 cents in the country’s black market.
According to an unidentified senior official, the new notes (500 and 1,000 bolivars) may be issued after congressional polls in December 6.
Venezuelan citizens carry bundles of paper notes in bags instead of wallets due to rising inflation and decreasing currency. The situation is expected to get worse because inflation is the fastest globally. The same official said it can even end at 150 percent this year.
The government does not regular economic figures anymore. This was stopped last December after it reported that inflation went up to 69 percent.
Venezuela does not plan to replace the existing tri-level exchange rate system soon as the government plans to increase dollar revenues by developing mining and petrochemical projects and reducing its reliance on oil.
One USD is valued 725 bolivars in black market outlets. Venezuelans turn to these markets if they fail to obtain government approval to buy foreign currency at official exchange rates which are 6.3, 12.8 and 200 respectively.
The country has a minimum wage of 7,422 bolivars monthly which equates to roughly $37 at the lowest legal exchange rate. It is only pegged $10 at black market rates.
A combined exchange rate is not possible until the economy is diversified and local production rises.
Venezuela’s foreign reserves dropped to a low of $15.4 billion (last 12 years) last July 27.
The People’s Bank of China (PBOC) infused 140 billion Yuan or roughly $21.8 billion into the country’s inter-bank money market in the effort to push lethargic economic growth and boost confidence of investors.
The PBOC website provided information that this was done through short-term liquidity operations.
Loans can mature within six days with a standard weighted bid rate of 2.3 percent.
This approach was introduced by the Chinese government in 2013.
It is meant to address fluctuations in terms of liquidity and stabilize costs of interbank funding.
At present, there is tremendous market volatility in this country as well as greater than before intervention by the PBOC.
This produced minimal effects on markets as Chinese stocks were closed before this was announced and the Shanghai Composite Index was down by 1.3 percent.
The Yuan turned around earlier declines and closed a bit higher than the US dollar with volumes climbing to the second highest level.
According to traders, the market was split over the currency’s direction following the decision of the PBOC to trim the lending rate (25 basis points) and reserves (50 basis points) for many large banks.
Monetary easing puts more pressure on the currency for depreciation. However, market stakeholders believe the PBOC will defend the Yuan’s value if needed.
Yuan closed a little firmer at 6.4105 per one US dollar and opened at 6.4181 per US dollar.
The market was unsure where the currency was headed. The belief is the currency can get support at 6.5 per dollar in the medium-term despite long-term possibility of further depreciation.
The US dollar climbed up one percent versus other principal currencies and rallied from seven-month lows. Meanwhile, the People’s Bank of China (PBOC) downgraded the standard bank lending rate by 25 basis points to 4.6 percent starting August 26. The PBOC also relaxed reserve prerequisites.
The easing decision came following the decline of stock indexes in China by more than seven percent touching the lowest levels since December of 2014. The rate reduction caused a relief rally as US and Euro region shares rebounded sharply and prices of commodities also increased.
The USD index went up 1.28 percent or 94.53. It was last ahead 0.91 percent versus the yen at 119.77 yen. On the other hand, the euro was down 1.45 percent against the dollar at $1.1423.
Market analysts believed the decision of the PBOC boosted risk appetite by providing additional strength to markets.
The response of China’s central bank concentrated on economic data from the US and the possible Fed rate hike in 2015.
The rate increase is expected to support the dollar by driving more investments into the US.
The USD moved up 1.42 percent against the Swiss note at 0.9450 franc.
The Brazilian real decreased 1.5 percent and crossed the crucial level of 3.6 per dollar for the first time in over 12 years as traders became more apprehensive about the ongoing political crisis in Brazil.
The currency extended its losses while other currencies in emerging markets became more stable.
The real closed at 3.6072 per US dollar which is the weakest level since the first quarter of 2003.
Sources say the sorry state of global markets indicates another possible interest rate cut by the Reserve Bank of Australia although many economic analysts stated that markets may be exaggerating.
An investment bank in the US (Citi Bank) reported an increase in expectations of a third cut for 2015 especially with the 76 percent probability of 25 basis points reduction during the RBA’s board meeting in November.
Meanwhile, Credit Suisse pointed out a likely cut of 25 basis points at the September board meeting which is 37 percent possible in a separate index.
So far, the RBA reduced cash rates two times this year, from 2.5 percent to a low of two percent and looks to leave it at that rate.
In spite of the odds, economists said that the decline of this week’s share values is not significant enough to justify another reduction.
The recovery of local stock markets reinforced the advice against any over-reaction.
On the other hand, UK-based Capital Economics announced that the stock market rout will not result to feeble consumer demand and investments.
Some analysts argued that economic events in China and other Asian countries are not like the 1997 crisis when capital flight destabilized currencies and progress while increasing sovereign debt ratios.
Chinese economists maintain that Beijing need not resort to using up fiscal measures to sustain growth rates at seven percent.
The shared currency appreciated 4.5 percent versus the USD during the last two weeks. The euro maintained its lead over the dollar yesterday and rallied 1.8 percent to improve on $1.159 during the close of stock market trading in Europe.
Market analysts credited the euro’s strong performance to diminishing fears regarding European economies with the single currency showing “safe-haven” attributes.
Bets that the currency will decrease have been abandoned.
The hunt for “safe havens” can be boosted further by the collapse in stocks as investors avoided risk assets because of apprehensions regarding the Chinese economy’s condition and the next meeting of the US central bank.
Meanwhile, the Japanese yen and Swiss franc earned 2.5 percent and 4 percent respectively compared to the US dollar.
Traders are turning more upbeat on the euro because of these developments.
Observers assert that this is one reason why trading targets for the euro and dollar reached the range of $1.12 and $1.14.
According to some analysts, the cessation in the euro currency “carry trade” where traders sell notes with low interest rates and use said funds to buy another currency yielding a higher rate also propped up the common currency.
In case the carry trade is not effective, the euro will not be utilized as funding currency and is going to be fully supported.
Some market economists say the euro’s strength cannot be associated with a move in terms of interest rate expectations.
The Canadian dollar retreated sharply versus its US counterpart and reached its lowest level during the last 11 years as prices of crude oil plunged by six percent yesterday. This took place following the significant decline suffered by Chinese stocks.
Unfavorable data from China ignited expectations that Beijing may opt for measures to allay markets.
The CAD finished at C$1.3262 to the USD (75.40 US cents) which is a fallback from the Bank of
Canada’s official close of C$1.3169 (75.94 US cents) last Friday.
It settled at C$1.3290 (75.24 US cents) earlier in early session which is the lowest since August of 2004.
The price of oil, a principal Canadian export product, went down to $37.75 per barrel before it settled at $38.24 or 5.46 percent. Oil suffered its longest weekly losing stretch since 1986 during the previous week.
Meanwhile, the weak US dollar dropped to its lowest during the last seven months against major peers.
Market analysts in Canada believe the momentum versus the Canadian dollar has picked up so far. The prices of government bonds were higher with the price (two years) up by 1.5 Canadian cents or 0.322 percent. On the other hand, the benchmark price (10 years) increased four Canadian cents to produce 1.264 percent.
The two-year bond spread for Canada and the US was minus 26.2 basis points. On the other hand, the 10-year range was minus74.6 basis points.
Central Bank policymakers in the Euro Region and Japan have been placed in a spot by the devaluation of the Chinese currency.
The sudden move made by china to weaken the Yuan has affected emerging markets as well as commodity-based notes due to apprehensions about impact on inflation, export products and equity markets.
The European Central Bank saw the common currency increase last week against the US dollar after the devaluation. Markets do not believe the euro zone economy improved but instead short euro positions are being relaxed manifesting its role as funding currency.
The currency move made by Beijing occurs at a difficult time for the European Union. There is very weak data from France, Italy and Germany. Besides, inflation in the region is imminent together with monetary easing, fragile growth and cheap oil.
ECB minutes from its July policy meeting warned of financial developments in the Asian nation which could have negative consequences on the economic viewpoint in Europe. According to ECB President ECB president Mario Draghi, the increasing euro is not a positive sign.
Expectations on Euro zone inflation declined sharply after the devaluation with a five-year forward swap rate for price rises.
Meanwhile, the Bank of Japan is thinking along the same lines. GDP contracted in the second quarter by 1.6 percent undercutting the “Abenomics” recovery approach of Prime Minister Shinzo Abe.
FOREX traders in Tokyo think devaluation of Asian currencies will become a problem for the Japanese government as recovery abates and the fragile yen weighs on Abe’s slumping approval ratings.
An initial assessment of Nigerian Forex showed that it has evolved like the transition of Europe History from the Dark Ages, through the Renaissance and finally into the modern era. FX trading in Nigeria encountered vast obstacles during the “dark ages” period with restricted knowledge. It was determined by probability as there was no system to gauge success. Superstitious traders were relying on the graces of Lady Luck. Forex trading was in the midst of darkness and chaos.
But true to the survival of the fittest by Darwin, it persisted and initiated the age of discovery! With more info and proper instruments, the final phase promises better purpose, coordination and institutions.
Structures were in place during the latest Lagos Forex Expo & Conference organized by Savannah Services. It became the vehicle to (1) link allactive players in the industry; (2) educate the traders about present market opportunities; and (3) provide networking opportunities.
The expo widened media exposure as many interviews from several TV stations, notably National Carrier and Silverbird. The latter featured the expo in its most important morning Silverbird programme segments thatbenefitted more viewers.
The first of its kind in Nigeria, the expo was held on August 13&14 at the Sheraton Hotel. In attendance were agents from the Central Bank of Nigeria. This proves that the government was panic-stricken to put its organization in order to safeguard funds of the investors that were placed on the market every day.
Forex trading in Nigeria has entered the modern age! It follows that domestic industry will finally gain government support and involvement. With them as overseers, the market will gain confidence and motivate the participation of more institutional players!
Many are expecting gold prices to go higher than $1,200 per ounce in the coming months. One of the reasons given was that there is an ongoing scare of a pending currency way. The devaluation of the yuan mid August has made the equity markets so unstable that there was a boost in physical gold and ETF purchases. These statements were released during a conference this month.
From a 5 ½ year low, gold has bounced back 8% within minutes of the Federal Reserves’ meeting on various policies as well as an expected increase in US interest rates. Gold prices reached $1,168.40 last Friday.
Rajan Venkatesh, head of India bullion at ScotiaMocatta, part of Canada’s Bank of Nova Scotia, explained that since people were afraid of the currency wars, they are getting back to buying the precious metal and this increases the price.
Venkatesh further stated that gold prices can be within the range of $1,230 to $1,240 within the next couple of weeks. He was speaking from Goa State during the International Gold Convention.
Other experts also hinted to expect gold prices to have changes due to the recent happenings in the economic scene of leading countries.