Interbank market news scan: Fed chair opines on necessity for an improved payments system and testing central bank digital currencies…

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The Takeaway: Soon after issuing a statement on the fed funds rate and how warranted attention paid to rising yields should be, Federal Reserve Board chairman Jerome Powell remarked today about the need to further strengthen the global payments system with emphasis on its cross border nature. Mr Powell also provided an update on the testing of central bank digital currencies. Stakeholders in the payments system may want to pay attention to how intermediaries are treated in a central bank digital currency regime.

To see what we’re following, follow the links …

Crypto Exchanges: “Bitcoin is the most talked about cryptocurrency but Ethereum [the blockchain] has more features, including being more flexible” in its hosting of decentralized finance (DeFi) than the Bitcoin blockchain, according to Bank of America. Bank of America Sees DeFi ‘Potentially More Disruptive Than Bitcoin’ – CoinDesk

Decentralized Finance: Reputation-based lending is coming to decentralized finance (DeFi) next month with the release of Maple Finance’s “Pool Delegates” lending suite. Maple Finance Raises $1.4M for Its Reputation-Based DeFi Lending Platform (yahoo.com)

Crypto Exchanges: A number of venture capital giants have completed a financing round for Ethereum-based volatility and derivatives protocol Volmex Finance. Volatility derivatives project Volmex Finance attracts backing from VC giants (cointelegraph.com)

Crypto Prices: Bitcoin’s (BTC) price slid Thursday, retreating along with U.S. stocks and oil prices as U.S. Treasury yields touched some of the highest levels in a year. https://www.coindesk.com/market-wrap-bitcoin-loses-steam-60k-bond-yields

Yields: Rising U.S. bond yields will not hurt Asia’s emerging markets as badly as they did during the “taper tantrum” eight years ago, according to a report by S&P Global Ratings. https://www.cnbc.com/2021/03/18/asias-emerging-economies-can-withstand-rising-us-yields-says-sp.html

Central Banks: Both of the Federal Reserve and the Bank of England vowed to keep liquidity plentiful and not to taper support in the face of rising inflation until they see prolonged signs of an economic recovery. The FOMC served up a surprise with the majority of the dots flat through 2023. Both USD and GBP fell sharply after their respective central banks’ decisions before later stabilizing. Fed, BoE step back, yields push up (fxstreet.com)

Payments System: Federal Reserve chairman Jerome Powell offers remarks on improving the payments system. Closing remarks by Chair Powell at a conference hosted by the Committee on Payments and Market Infrastructures – Federal Reserve Board

Currency pairs that include top countries with foreign direct investment in the US …

The majority of foreign direct investment in the United States is held by Japan, the United Kingdom, Canada, the Netherlands, Germany, France, and Luxembourg. Since the Biden administration has taken office, the dollar-yen and dollar-euro have seen appreciation (4.9% and 1.5%, respectively), while the dollar-pound and the dollar-loonie have fallen, 2.4% and 2.3%, respectively.

Currency pair20 January 202119 March 2021Percentage change
USD/JPY103.9300108.99004.9
USD/GBP0.73450.7170-2.4
USD/CAD1.27311.2433-2.3
USD/EUR (1)0.82540.83741.5
Source: OANDA (1) The euro is the currency of France, German, and Luxembourg

18 March 2021, 9:46 pm EST

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