Currency Forwards and Option Hedging Strategies Rise with Soaring US Dollar

The US dollar has risen about 15% against a basket of currencies over the last year with rising U.S. interest rates and safe haven flows. The higher greenback has reduced the profits of U.S. multinational companies that convert foreign currency into dollars, multinationals such as Coca-Cola Co, Procter & Gamble and Philip Morris International are just some seeing an impact. The US dollar is at a two-decade high against the Japanese yen, up 13% this year. Against the Euro is … Continue reading “Currency Forwards and Option Hedging Strategies Rise with Soaring US Dollar”

Japanese Yen Weakest Major Currency Against US Dollar in 2022

Rising U.S. interest rates and safe haven flows have seen the U.S. dollar soar in 2022. The American 10-yr yield rose six basis points to 3.12%, hitting a fresh high for the year while the 2-yr yield fell five basis points to 2.67%. The US Dollar Index (DXY) hit a 20-year high, the highest levels since 2002. The weakest component of the index has been the Japanese yen, sliding around 12 per cent against the dollar and underperforming even weak … Continue reading “Japanese Yen Weakest Major Currency Against US Dollar in 2022”

Japan Adds to Bond Route Selling Treasuries as Currency Hedging Costs Soar

Bonds have collapsed at a rapid pace with soaring inflation and a one-way market. The US dollar has soared at the same time with the BOJ and the Fed Reserve at difference policy ends. The Japanese Central Bank still is an aggressive buyer of JGB’s while the Fed pares its $9 trillion balance sheet. Japanese institutional managers are now selling US bonds, BMO Capital Markets shows they have offloaded almost $60 billion over the past three months. One could argue this … Continue reading “Japan Adds to Bond Route Selling Treasuries as Currency Hedging Costs Soar”

US Dollar Hits 20 Year High in April on High Rates and Safe Haven Flows

The U.S. dollar has soared with safe haven flows as geopolitical fears grip the world and interest-rate increases from the Federal Reserve. US Dollar Index (DXY) hit a 20-year high, the highest levels since 2002. The Greenback reached multiyear highs against the euro, the British pound and the yen in April with the positive rate differentials, a huge part of the dollar’s strength. A strengthening dollar also tends to weigh heavily on emerging markets currencies, a rising dollar makes dollar-denominated … Continue reading “US Dollar Hits 20 Year High in April on High Rates and Safe Haven Flows”

Monetary Authority of Singapore Tightened Monetary Policy to Slow Inflation’s Momentum 

The Monetary Authority of Singapore (MAS), Singapore’s central bank tightened its monetary policy on Thursday. The MAS manages monetary policy through exchange rate settings, rather than interest rates. The authority re-centered the mid-point of the Nominal Effective Exchange Rate, or S$NEER, at the prevailing level of the S$NEER. It also increased slightly the rate of appreciation of the policy band. The MAS adjusts its policy via three levers: the slope, mid-point and width of the policy band. The Monetary Authority of … Continue reading “Monetary Authority of Singapore Tightened Monetary Policy to Slow Inflation’s Momentum “

Swiss National Bank’s Zurbruegg Says Not Focus of Monetary Policy to Curb Risk to Financial System Vulnerabilities

The Swiss National Bank Vice Chairman Fritz Zurbrügg in a speech in Geneva Tuesday said the focus of monetary policy is price stability and economic developments, and not curbing financial system vulnerabilities”. He added “Moreover, we have observed an increase in affordability risks over recent years.” “In Switzerland, vulnerabilities in the residential real estate and mortgage markets have increased since the onset of the pandemic,” Zurbruegg said in a speech in Geneva. “Moreover, we have observed an increase in affordability risks … Continue reading “Swiss National Bank’s Zurbruegg Says Not Focus of Monetary Policy to Curb Risk to Financial System Vulnerabilities”

Russia Credit Rating Slashed to Junk by S&P and Fitch, Moody’s Issues Junk Warning

Credit rating slashed Russia’s credit rating Friday. S&P and Fitch lowering Russia’s rating to ‘junk’ status, Moody’s said it is putting it on review for a downgrade to junk. At the same time S&P and Fitch swiftly cut Ukraine on default worries. The International Monetary Fund is exploring all options to aid Ukraine with further financial support, said its head, Kristalina Georgieva. The Russian declaration of war on Ukraine has ravaged both countries finances and people with severe consequences for … Continue reading “Russia Credit Rating Slashed to Junk by S&P and Fitch, Moody’s Issues Junk Warning”

Russian Stocks & Rouble Freefall as Putin Recognizes Donbas Independence

Tensions between Russia and Ukraine continued to soar after Russia’s parliament appealed to Putin to formally recognize the Russian-backed separatist quasi-states Donetsk and Luhansk People’s Republics independence, in the Donbas region in Ukraine. Such a move Germany’s Scholz says would be a one-sided breach of Minsk format. This would torpedo the peace process and sent the MOEX Russia Index dumped as much as 14% with Rosneft (-18.3%), VTB (-17.3%) and Sberbank (-16.9%) hit. The Rouble shed over 2% on Monday. … Continue reading “Russian Stocks & Rouble Freefall as Putin Recognizes Donbas Independence”

Erdogan Takes Measures to Protect Turks from Currency Volatility Giving Turkey Lira Reprieve

With the Turkish Lira in freefall Turkey’s President Recep Tayyip Erdogan announced extraordinary measures to save it from the depths Monday. Turkey is introducing a new program that will protect savings from the prices moves and gave the TRY a reprieve. The lira collapse accelerated with Turkey Central Bank sharp rate cuts. Erdogan vows to win his so called “economic war of independence”. With Turks not affording bare necessities as inflation runs rampant from the collapsed currency and elections in … Continue reading “Erdogan Takes Measures to Protect Turks from Currency Volatility Giving Turkey Lira Reprieve”

Turkey A Lesson in Why Central Banks Need to Be Independent as Lira Collapses Accelerates

Turkey is a great lesson on why Central Banks and Governments should be independent. Turkey’s currency, the lira collapse accelerated further after its central bank cut its main interest rate by 1%, from 15% to 14% on Thursday with concerted pressure from President Recep Tayyip Erdogan wanting rates cut to stimulate the economy. Meanwhile Turks can’t afford bare necessities as inflation runs rampant from the collapsed currency. Inflation in Turkey has climbed above 21.7% over the year. “The Committee decided … Continue reading “Turkey A Lesson in Why Central Banks Need to Be Independent as Lira Collapses Accelerates”