Interbank market news scan: Asia buffs up its foreign reserves …

Foreign exchange rates as of 26 February 2021, 8:29 EST

AUS/USD : .7950

GBP/USD: 1.4113

EUR/USD: 1.2193

USD/CAD: 1.2523

USD/JPY: 106.1000

USD/MXN: 20.6400

USD/NOK: 8.3953

USD/DKK: 6.0978

Source: OANDA

Bitcoin and Ethereum rates as of 26 February 2021, 8:29 EST

BTC/USD: 49,968.1

ETH: 1,596.59

Source: OANDA

Interest rates of interest ….

Effective Federal Funds Rate: .07

Prime Rate: 3.25

Discount Window Rate: .25

Two-year Treasury: .12

Ten-year Treasury: 1.38

Thirty-year Treasury: 2.24

Source: Federal Reserve

Follow the links …

Central banks in Asia’s emerging economies added $467.7 billion to their foreign-exchange reserves last year, the most since 2013 when the region’s markets were rattled by the taper tantrum. Asia’s Central Banks Build Taper Tantrum Levels of Reserves (bloombergquint.com)

Interbank market news scan: Will central banks tighten rates sooner than later and beware the reflation narrative …

   Exchange Rate as of 22 February 2021 As of 9:21 am EST Exchange Rate as of 25 February 2021
AUD/USD0.7868 0.7929
USD/CAD1.2613 1.2558
USD/CNY6.4859 6.4548
EUR/USD1.2117 1.2152
USD/INR72.4500 72.2983
GBP/USD1.4001 1.4141
USD/JPY105.4100 105.7300
USD/MXN20.4212 20.4361
USD/DKK6.1342 6.1185
USD/NOK8.4557 8.4322
BTC/USD55,701.5000 49,795.0000
ETH/USD1,955.4000 1,622.5700
Source: OANDA

From the Federal Reserve …

As of February 25, 2021, the Federal Reserve reported the prime bank rate is 3.25%.  The discount window rate is at .25% and the effective fed funds (interbank overnight rate) is at .07%. 

The Federal Reserve also reported the 2-year Treasury yield at .11; the 10-year yield at 1.37%, and the 30-year yield at 2.21%.

Follow the links ….

US futures have turned negative, with European stock markets reversing earlier gains as rising yields continue to weigh on sentiment. Stocks pull back on higher yields (fxstreet.com)

European stocks enjoyed another positive session yesterday, driven once again by the travel, hospitality and commercial real-estate sector. Higher rate concerns put to one side with Europe set for a positive open | CMC Markets

It’s all about that reflation narrative, a narrative that continues to force upward pressure on stocks and downward pressure on the Buck. In our Wednesday call, we did however warn to start expecting more dovish speak out of central banks around the globe, in an effort to slow the pace of the USD decline. The reflation trade narrative [Video] (fxstreet.com)

25 February 2021

A very quick thought: Thought as base for currency value?

I believe that contained in all currency, whether digital or analog, is some notion of value. What is the next value play that drives up the value of a currency other than trust? Can intellectual property or thought be a currency driver? Crypto is mined when a problem is resolved. Can problem solvers be the next currency issuers?

I think in the next twenty years, the US dollar will be the default currency within the United States. As Amazon and other platforms replace the US public delivery structure, they will issue more of their own “currency” and compete with the US. They will become exclusive to their own members and keep low income people off of their platforms, especially as the affluent move out of large cities and into the suburbs, exburbs, and rural areas where they can find more space and be around fewer people.

Interbank market news scan: Fed chair Powell shares economic output with US Senate …

The following opening statement was delivered by Jerome Powell, chairman of the Board of Governors of the Federal Reserve System:

My takeaways

  • The pandemic has had a disproportionate impact on minority group and low-wage workers.
  • The Federal Reserve’s monetary policy remains the same. No change in the two-percent longer-run inflation goal.
  • Current monetary policy of two percent longer-run inflation goal asserts an accounting for positive benefits to low and moderate income groups with a flexible inflation average target with two percent as the anchor.
  • The Federal Reserve will continue with its purchase of $120 billion a month in mortgage-backed and agency-backed securities each month.

“Chairman Brown, Ranking Member Toomey, and other members of the Committee, I am pleased to present the Federal Reserve’s semiannual Monetary Policy Report.

At the Federal Reserve, we are strongly committed to achieving the monetary policy goals that Congress has given us: maximum employment and price stability. Since the beginning of the pandemic, we have taken forceful actions to provide support and stability, to ensure that the recovery will be as strong as possible, and to limit lasting damage to households, businesses, and communities. Today I will review the current economic situation before turning to monetary policy.

Current Economic Situation and Outlook
The path of the economy continues to depend significantly on the course of the virus and the measures undertaken to control its spread. The resurgence in COVID-19 cases, hospitalizations, and deaths in recent months is causing great hardship for millions of Americans and is weighing on economic activity and job creation. Following a sharp rebound in economic activity last summer, momentum slowed substantially, with the weakness concentrated in the sectors most adversely affected by the resurgence of the virus. In recent weeks, the number of new cases and hospitalizations has been falling, and ongoing vaccinations offer hope for a return to more normal conditions later this year. However, the economic recovery remains uneven and far from complete, and the path ahead is highly uncertain.

Household spending on services remains low, especially in sectors that typically require people to gather closely, including leisure and hospitality. In contrast, household spending on goods picked up encouragingly in January after moderating late last year. The housing sector has more than fully recovered from the downturn, while business investment and manufacturing production have also picked up. The overall recovery in economic activity since last spring is due in part to unprecedented fiscal and monetary actions, which have provided essential support to many households, businesses, and communities.

As with overall economic activity, the pace of improvement in the labor market has slowed. Over the three months ending in January, employment rose at an average monthly rate of only 29,000. Continued progress in many industries has been tempered by significant losses in industries such as leisure and hospitality, where the resurgence in the virus and increased social distancing have weighed further on activity. The unemployment rate remained elevated at 6.3 percent in January, and participation in the labor market is notably below pre-pandemic levels. Although there has been much progress in the labor market since the spring, millions of Americans remain out of work. As discussed in the February Monetary Policy Report, the economic downturn has not fallen equally on all Americans, and those least able to shoulder the burden have been the hardest hit. In particular, the high level of joblessness has been especially severe for lower-wage workers and for African Americans, Hispanics, and other minority groups. The economic dislocation has upended many lives and created great uncertainty about the future.

The pandemic has also left a significant imprint on inflation. Following large declines in the spring, consumer prices partially rebounded over the rest of last year. However, for some of the sectors that have been most adversely affected by the pandemic, prices remain particularly soft. Overall, on a 12-month basis, inflation remains below our 2 percent longer-run objective.

While we should not underestimate the challenges we currently face, developments point to an improved outlook for later this year. In particular, ongoing progress in vaccinations should help speed the return to normal activities. In the meantime, we should continue to follow the advice of health experts to observe social-distancing measures and wear masks.

Monetary Policy
I will now turn to monetary policy. In the second half of last year, the Federal Open Market Committee completed our first-ever public review of our monetary policy strategy, tools, and communication practices. We undertook this review because the U.S. economy has changed in ways that matter for monetary policy. The review’s purpose was to identify improvements to our policy framework that could enhance our ability to achieve our maximum-employment and price-stability objectives. The review involved extensive outreach to a broad range of people and groups through a series of Fed Listens events.

As described in the February Monetary Policy Report, in August, the Committee unanimously adopted its revised Statement on Longer-Run Goals and Monetary Policy Strategy. Our revised statement shares many features with its predecessor. For example, we have not changed our 2 percent longer-run inflation goal. However, we did make some key changes. Regarding our employment goal, we emphasize that maximum employment is a broad and inclusive goal. This change reflects our appreciation for the benefits of a strong labor market, particularly for low- and moderate-income communities. In addition, we state that our policy decisions will be informed by our “assessments of shortfalls of employment from its maximum level” rather than by “deviations from its maximum level.”1 This change means that we will not tighten monetary policy solely in response to a strong labor market. Regarding our price-stability goal, we state that we will seek to achieve inflation that averages 2 percent over time. This means that, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time. With this change, we aim to keep longer-term inflation expectations well anchored at our 2 percent goal. Well-anchored inflation expectations enhance our ability to meet both our employment and inflation goals, particularly in the current low interest rate environment in which our main policy tool is likely to be more frequently constrained by the lower bound.

We have implemented our new framework by forcefully deploying our policy tools. As noted in our January policy statement, we expect that it will be appropriate to maintain the current accommodative target range of the federal funds rate until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time. In addition, we will continue to increase our holdings of Treasury securities and agency mortgage-backed securities at least at their current pace until substantial further progress has been made toward our goals. These purchases, and the associated increase in the Federal Reserve’s balance sheet, have materially eased financial conditions and are providing substantial support to the economy. The economy is a long way from our employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved. We will continue to clearly communicate our assessment of progress toward our goals well in advance of any change in the pace of purchases.

Since the onset of the pandemic, the Federal Reserve has been taking actions to support more directly the flow of credit in the economy, deploying our emergency lending powers to an unprecedented extent, enabled in large part by financial backing and support from Congress and the Treasury. Although the CARES Act (Coronavirus Aid, Relief, and Economic Security Act) facilities are no longer open to new activity, our other facilities remain in place.

We understand that our actions affect households, businesses, and communities across the country. Everything we do is in service to our public mission. We are committed to using our full range of tools to support the economy and to help ensure that the recovery from this difficult period will be as robust as possible.

Thank you, I am happy to take your questions.”

23 February 2021

Interbank market news scan: Federal Reserve, community development, foreign exchange rates …

Federal Reserve Board Governor Lael Brainard made the following remarks regarding the economy, the Federal Reserve, and low income communities:

“Thank you, President Kaplan, our Advance Together partners, and everyone here for joining us today. I am honored to participate in this event and welcome the awardees of this important initiative to celebrate your success. Today marks a significant milestone in this effort to improve economic opportunity for residents of 25 counties across the great state of Texas. The Federal Reserve Bank of Dallas created Advance Together as a way to promote initiatives in Texas that reduce inequities in education and workforce development, and these Implementation Awards recognize outstanding examples of furthering those goals.

The Importance of Education and Workforce Development Initiatives
At the Federal Reserve, our community development mission is to promote economic growth and financial stability across the country, particularly in vulnerable communities. The ability to access quality education and training to build workforce skills is critical for low-income workers seeking greater opportunity for themselves and their families. Likewise, reducing the disparities in labor market opportunities among individuals in our society helps to support broader economic growth and financial stability.

These issues have taken on even greater importance over the past year. The COVID-19 pandemic has upended our personal and professional lives and continues to cause economic hardship for many Americans. While the economy has recovered substantially from the effects of the pandemic, it is concerning to see signs that the improvements have been uneven, with some households continuing to struggle with unemployment and facing financial difficulty.

Information from the Federal Reserve Board’s Survey of Household Economics and Decisionmaking, or SHED, provides evidence of these disparities.1 In the July 2020 responses to the SHED, many households reported major employment disruptions due to COVID-19, including layoffs, reductions of hours, or unpaid leave. By mid-summer, many of the affected individuals had returned to work, and many were receiving unemployment insurance benefits and other financial assistance. Even so, unemployment remained very high in July, and 23 percent of SHED respondents said they were either “just getting by” or “finding it difficult to get by.” Not surprisingly, those experiencing employment disruptions disproportionately reported that they were likely to have difficulty paying their bills.

The survey showed that employment disruptions and financial challenges disproportionately affected people of color and low-income families. And, unlike during previous recessions, a larger share of working women than men were laid off from their jobs.2

For many families, the pandemic exacerbated existing financial challenges. Economic mobility is largely driven by family financial stability and geographic resources such as transportation, quality education, and broadband access. The Fed’s research and its ongoing work in community development show that there is no quick fix for the disparities in household financial stability. And no single organization or government agency can solve these complex problems alone.

The Importance of Collaborative Efforts
This brings me to the importance of collaboration to address multidimensional community issues. While affordable housing and quality jobs are two very visible needs for low-income households, meeting these needs requires strategies that stretch across the fabric of the whole community, including childcare, education and training, transportation, and a safe and healthy environment. Collaboration between individuals and organizations of different talents and strengths can help find the kind of holistic solutions needed to bring greater opportunity to those at risk of being left behind in the recovery.

Today, we are here to celebrate Advance Together, one such effort to foster economic inclusion through innovative and collaborative programs. In 2020, the Federal Reserve completed a review of “place based” community development initiatives, those focused on a single community or area, across its 12 districts. While the place-based initiatives varied in purpose, scope, and approach from community to community, the very best of those local collaborations are reflected in Advance Together’s winning proposals. Most notably, each of these community-driven initiatives uses evidence-based research, fosters public–private partnerships, and promotes a collective vision for success.

The four winners that we are honoring today are the Educate Midland and Education Partnership of the Permian Basin; the Big Country Manufacturing Alliance, based in Abilene; the Family Pathways 2-Gen Coalition in Austin; and the Deep East Texas College and Career Alliance.

It has truly been a pleasure to learn about the unique and innovative efforts each of you are undertaking to address the education and workforce challenges in your own communities. Members of the Educate Midland & Education Partnership are analyzing student data to deepen their understanding of student outcomes by race and to identify practices that can reduce inequities in education and workforce development that limit economic opportunity. The Big Country Manufacturing Alliance is streamlining training and job placement for young workers interested in manufacturing careers. The Family Pathways 2-Gen Coalition supports students with children on their path to a college degree. And, finally, the Deep East Texas College and Career Alliance is helping rural and first-generation college students attain post-secondary credentials that are in demand by employers.

Just as Advance Together benefited from past place-based initiatives, the lessons learned from your local collaborations will inform and influence new community strategies going forward. I look forward to following your efforts to create economic opportunity in communities across Texas. It’s really an honor to join in your celebration today. Congratulations to the winners and thank you to all of the participants.”

Federal Reserve data

As of February 19, 2021, the Federal Reserve reported the prime bank rate is 3.25%.  The discount window rate is at .25% and the effective fed funds (interbank overnight rate) is at .07%. 

The Federal Reserve also reported the 2-year Treasury yield at .11; the 10-year yield at 1.34%, and the 30-year yield at 2.14%.

Foreign exchange rates:

Currency pairsExchange Rate as of 4:15 pm 22 February 2021(1) As of 6:23 am EST Exchange Rate as of 23 February 2021(2)(3)
AUD/USD0.7873 0.7896
USD/CAD1.2596 1.2613
USD/CNY6.4555 6.4631
EUR/USD1.2136 1.2149
USD/INR72.5000 72.4890
GBP/USD1.4025 1.4089
USD/JPY105.5800 105.1300
USD/MXN20.4000 20.7170
USD/DKK6.1268 6.1225
USD/NOK8.4467 8.4661
BTC/USD  51,971.1000
ETH/USD  1,700.9700
Sources: Federal Reserve(1); Reuters-FX rate(2), Crypto-rates(3)

Interbank market news scan: Central banks, foreign exchange …

Follow the links …

Sudan’s central bank steeply devalued the country’s currency, as part of a broader effort to win debt relief and revive the struggling economy. Sudan Central Bank Devalues the Currency to Revive Economy (msn.com)

The Central Bank of Morocco is now studying the concept of central bank digital currencies (CBDCs) and has set up a committee to extensively explore its pros and cons, according to reports on February 20, 2021. Morocco’s Central Bank Looks to Launch Own Digital Currency | BTCMANAGER

Assistant Governor Christopher Kent’s speech on FX markets around the turn of the year. FX Markets Around the Turn of the Year | Speeches | RBA

Reserve Bank of Australia’s cash rate target is 0.1%; 3-year Australian Government Bond Yield target, 0.1%; inflation rate, 0.9%. Reserve Bank of Australia (rba.gov.au)

People’s Bank of China announced open market operation of RMB10 billion, seven days maturity, at 2.20%. Open Market Operations No.33 [2021] (pbc.gov.cn)

Currency pairsExchange Rate as of 4:15 pm 16 February 2021(1) As of 6:53 pm EST Exchange Rate as of 21 February 2021(2)(3)
AUD/USD0.7762 0.7877
USD/CAD1.2694 1.2609
USD/CNY6.4567 6.4555
EUR/USD1.2126 1.2116
USD/INR72.6000 72.5600
GBP/USD1.3855 1.4012
USD/JPY104.9400 105.3700
USD/MXN19.9300 20.4320
USD/DKK6.1325 6.1339
USD/NOK8.4558 8.4627
BTC/USD  52843.4000
ETH/USD  1,859.5100
Sources: Federal Reserve(1); Reuters-FX rates(2); OANDA-Crypto rates(3)

Interbank market news scan: Central banks, foreign exchange; New Zealand stands pat on interest rates …

Follow the links …

The Central Bank of Nigeria (CBN) sold a total of $10.308 billion in the foreign exchange (FX) market in the first six months of 2020. Nigeria: FX Market – CBN Intervened With U.S.$10.308 Billion in Six Months – allAfrica.com

A Canadian energy firm became the world’s first nonfinancial issuer to sell debt linked to the main LIBOR alternative, a boost for policymakers in their struggle to encourage market adoption of the new financial benchmark. Corporate Bond Sale Boosts Campaign to Kill off LIBOR | Treasury & Risk (treasuryandrisk.com)

Central bank support for pandemic-hit economies looks to endure well past the recovery in output, leaving investors little option but to keep chasing a parabolic bull market until the fabled “punch bowl” is eventually removed. Column: Central Bank ‘Punch Bowl’ Still Brimming for Markets | Investing News | US News

New Zealand’s central bank is expected to leave interest rates unchanged at its first monetary policy decision of 2021 next week, as the economy rebounds faster from the coronavirus pandemic, but any tightening is still a long way off. New Zealand central bank to stand pat as economy rebounds – Reuters poll (msn.com)

Northern Trust (Nasdaq: NTRS) is experiencing strong demand for its Foreign Exchange (FX) currency management services with a number of significant new mandates over the past 12 months. Northern Trust Expands Foreign Exchange Currency Management Services Footprint with Key New Mandates (apnews.com)

Currency pairsExchange Rate as of 4:15 pm 16 February 2021(1) As of 8:24 am EST Exchange Rate as of 19 February 2021(2)(3)
AUD/USD0.7762 0.7859
USD/CAD1.2694 1.2612
USD/CNY6.4567 6.4540
EUR/USD1.2126 1.2135
USD/INR72.6000 72.4710
GBP/USD1.3855 1.4001
USD/JPY104.9400 105.3800
USD/MXN19.9300 20.3620
USD/DKK6.1325 6.1264
USD/NOK8.4558 8.4253
BTC/USD  51,893.7000
ETH/USD  1,896.1500
Sources: Federal Reserve(1); Reuters-FX rates(2), OANDA-crypto rates(3)

Interbank market news scan: Central banks shouldn’t try to fight climate change …

Follow the links …

Central banks shouldn’t try to fight climate change, as doing so could endanger financial stability and undermine their independence, a top Czech monetary official said. Central Banks Can’t Fix Climate Change, Czech Policy Maker Says (msn.com)

The European Central Bank will pay the currency bloc’s 19 central banks 1.6 billion euros in dividends this year, down from the 2.4 billion euros it paid a year ago as its profit declined, it said in a statement on Thursday. ECB cuts dividend payment to euro zone central banks | Nasdaq

Deutsche Bank AG scaled back plans for its bonus pool after the European Central Bank objected to proposed payout levels, highlighting the challenges of rewarding top performers while heeding demands for restraint during the global pandemic. Deutsche Bank Cut Bonus Pool Plans After Criticism From ECB (msn.com)

Currency pairsExchange Rate as of 4:15 pm 16 February 2021(1) As of 12:54 pm EST Exchange Rate as of 18 February 2021(2)(3)
AUD/USD0.7762 0.7779
USD/CAD1.2694 1.2701
USD/CNY6.4567 6.4869
EUR/USD1.2126 1.2079
USD/INR72.6000 72.6500
GBP/USD1.3855 1.3948
USD/JPY104.9400 105.7300
USD/MXN19.9300 20.4150
USD/DKK6.1325 6.1593
USD/NOK8.4558 8.4637
BTC/USD  48,358.6000
ETH/USD  1,700.6400
Sources: Federal Reserve (1), Reuters-FX rates (2), OANDA-crypto rates

18 February 2021

Interbank market news scan: Central banks, foreign exchange; Peoples Bank of China not afraid of enough liquidity …

Follow the links …

Naci Agbal, Turkey’s new central bank governor, began his career as a financial inspector three decades ago. He hopes such devotion to the rules will see him – and the economy – through one of the trickiest turnaround jobs in emerging markets. NEWSMAKER-Back-to-basics Agbal hopes this time is different at Turkey’s central bank | Nasdaq

China provided medium-term funds to lenders on Thursday, giving banks some relief after its cash drainage last month triggered the country’s worst liquidity squeeze since 2015. China Rolls Over $31 Billion in Medium-Term Loans to Banks – Bloomberg

Zambia became the second country in the world to increase its benchmark interest rate this year as it seeks to bring down “spiraling” inflation that’s at a five-year high. Zambia Central Bank Hikes Rate to Fight Surging Inflation – Bloomberg

Weakness in both the dollar and euro is posing a dilemma for investors about which is the best source of funding for emerging-market carry trades. On balance, the U.S. currency is still first choice. Carry Traders Clash Over Which Major Currency Has Most to Lose – Bloomberg

New York Attorney General Letitia James announced on Wednesday her office has sued to shut down Coinseed, a cryptocurrency-trading app that prosecutors allege ignored securities laws and defrauded thousands of investors. NY AG sues to shut down crypto app Coinseed alleging it sold a worthless currency and defrauded investors (msn.com)

Economist Nouriel Roubini, known as “Dr. Doom” for his pessimistic market views, said “the Flinstones had a better monetary system than bitcoin” in an interview with Bloomberg Wednesday morning. The NYU professor argued bitcoin and other digital tokens shouldn’t even be considered currencies because they lack many of the basic traits currencies must possess. ‘Dr. Doom’ economist Nouriel Roubini says ‘the Flintstones had a better monetary system than bitcoin’ and the token should not be considered a currency (msn.com)

Currency pairsExchange Rate as of 4:15 pm 16 February 2021(1) As of 2:10 am EST Exchange Rate as of 18 February 2021(2)(3)
AUD/USD0.7762 0.7754
USD/CAD1.2694 1.2699
USD/CNY6.4567 6.4505
EUR/USD1.2126 1.2044
USD/INR72.6000 72.7270
GBP/USD1.3855 1.3851
USD/JPY104.9400 105.9000
USD/MXN19.9300 20.2248
USD/DKK6.1325 6.1742
USD/NOK8.4558 8.4960
BTC/USD  48,358.6000
ETH/USD  1,700.6400
Sources: Federal Reserve (1), Reuters-FX rates (2), OANDA-Crypto rates (3)

Interbank market news scan: Central banks can step-up their data analytics game …

Follow the links …

Keeping up with data collection, capture, normalization and storage is an enormous task. In the best-case scenario, central banks systematically collect structured data electronically through reporting systems and directly from banks, brokers and market data feeds. However, in many instances, data collection is ad hoc, poorly structured, or in a non-electronic form. Leveraging Technology for Central Bank Surveillance | Nasdaq

Central bank digital currencies (CBDCs) may signal the end of physical cash and thus propel interest in cryptocurrency from the darker side of society, according to Mike Dolan, editor-at-large for finance and markets at Reuters.

Namibia’s central bank held its benchmark interest rate at a record low in its first meeting of the year, striking a balance between supporting the economy and protecting its currency’s peg to the South African rand. Namibia Holds Interest Rate at 3.75% for Third Straight Meeting – Bloomberg

The National Bank of Hungary is likely to leave interest rates unchanged next Tuesday after a recent increase in closely watched inflation measures and continued volatility in prices and financial markets. Hungarian central bank to leave rates steady as inflation creeps higher | Reuters

Currency pairsExchange Rate as of 4:15 pm 16 February 2021(1) As of 11:35 am EST Exchange Rate as of 17 February 2021(2)(3)
AUD/USD0.7762 0.7729
USD/CAD1.2694 1.2724
USD/CNY6.4567 6.4542
EUR/USD1.2126 1.2032
USD/INR72.6000 72.8130
GBP/USD1.3855 1.3843
USD/JPY104.9400 106.0900
USD/MXN19.9300 20.2760
USD/DKK6.1325 6.1762
USD/NOK8.4558 8.5090
BTC/USD  46,403.2000
ETH/USD  1,686.7300