Interbank market news scan as of 12:42 pm AST: central banks, cryptocurrencies, foreign exchange

Currency pairsFederal Reserve as of 25 January 2021Reuters as of 25 January 2021Reuters as of 26 January 2021 
AUD/USD0.77280.77130.7754 
USD/CAD1.27111.27511.2695 
USD/CNY6.48106.47846.4636 
EUR/USD1.21791.21381.2166 
USD/INR72.980072.954572.8814 
GBP/USD1.36851.36641.3733 
USD/JPY103.7600103.7600103.7700 
USD/MXN19.925020.110120.0006 
USD/DKK6.10816.12666.1245 
USD/NOK8.48208.54188.5475 
Sources: Federal Reserve, Reuters

The dollar’s strength continues to vary since our post yesterday.  The dollar weakened against the Australian dollar, the Canadian dollar, and the Chinese yuan.  The dollar also weakened against the British pound and the Mexican peso.  It continues to trade flat against the Japanese yen.

In other news …

Bank Indonesia will continue to maintain loose monetary policy until such signs emerge, given that inflation is currently under control, says Perry Warjiyo, the central bank’s governor. Indonesia may see signs of inflation pressure in fourth quarter of 2021: Central bank governor (msn.com)

Brazil‘s central bank does not expect to raise interest rates in the immediate future because of an unusually high degree of economic uncertainty, minutes from its last policy meeting showed on Tuesday, although fiscal risks could prompt it to tighten policy faster than its baseline scenario suggests. Brazil central bank unlikely to raise rates now as economy sputters, minutes show | Nasdaq

Nigeria’s central bank held its benchmark lending rate at 11.5% on Tuesday, governor Godwin Emefiele said at its first interest rate meeting of 2021. Nigeria’s central bank holds benchmark lending rate at 11.5% | Reuters

China’s central bank won’t exit “prematurely” from its supportive monetary policies while at the same time keeping debt risks under control, Governor Yi Gang said. China Central Bank Won’t Exit Prematurely From Stimulus, Yi Says – Bloomberg

No existing cryptocurrency has a structure that is likely to allow it to work as a means of payment over the long term, Bank of England Governor Andrew Bailey told an online forum hosted by the Davos-based World Economic Forum on Monday. Current cryptocurrencies unlikely to last, Bank of England governor says | Reuters

Foreign exchange rates released by Federal Reserve as of 5:15 pm AST

Currency pairsFederal Reserve as of 25 January 2021Reuters as of 25 January 2021
AUD/USD0.77280.7713
USD/CAD1.27111.2751
USD/CNY6.48106.4784
EUR/USD1.21791.2138
USD/INR72.980072.9545
GBP/USD1.36851.3664
USD/JPY103.7600103.7600
USD/MXN19.925020.1101
USD/DKK6.10816.1266
USD/NOK8.48208.5418
Sources: Federal Reserve, Reuters

In the news …

The Federal Reserve Bank of New York’s Center for Microeconomic Data released the December 2020 Survey of Consumer Expectations (SCE) Household Spending Survey, which provides information on individuals’ experiences and expectations regarding household spending. The survey shows a continuation of relatively modest monthly household spending growth compared to pre-pandemic levels. Household Survey Shows Sustained Rebound in Year-Ahead Spending Growth Expectations – FEDERAL RESERVE BANK of NEW YORK (newyorkfed.org)

Interbank market news scan as of 1:13 pm AST: central banks, foreign exchange, finance ministries

Currency pairsFederal Reserve as of 18 January 2021Reuters as of 21 January 2021Reuters as of 22 January 2021Reuters as of 25 January 2021
AUD/USD0.77230.77600.77160.7726
USD/CAD1.27091.26311.27211.2716
USD/CNY6.48006.45956.48106.4764
EUR/USD1.20991.21651.21711.2127
USD/INR73.080072.960072.975872.9366
GBP/USD1.35991.37251.36801.3656
USD/JPY103.8000103.5200103.8000103.7900
USD/MXN19.747019.717719.950020.1570
USD/DKK6.14696.11416.11106.1380
USD/NOK8.53108.42858.48238.5584
Sources: Reuters, Federal Reserve

The dollar’s strength has varied over various currency pairs since the Federal Reserve’s 18 January 2021 posting of currency rates.  The AUD/USD increased three pips while the USD/CAD increased seven pips over the relevant period. The USD/NOK and USD/MXN also saw increases over the relevant period of 219 pips and 410 pips, respectively.  The USD/JPY traded flat over the same period.

The rupee strengthened versus the dollar with USD/INR falling 143 pips over the relevant period. The Chinese yuan also strengthened versus the dollar with the exchange rate decreasing 36 pips over the relevant period.

A pip is equal to one hundredth of one percent or 0.0001.

In other news …

The following are the central parity rates of the Chinese currency renminbi, or the yuan, against 24 major currencies announced on Monday by the China Foreign Exchange Trade System: https://www.bignewsnetwork.com/news/267636046/market-exchange-rates-in-china—-jan-25

According to the State Bank of Pakistan (SBP), the dollar today closed at Rs160.80 against the local currency as compared to Friday’s closing rate of Rs160.75. The rupee recorded a 0.03 per cent depreciation in its value. https://arynews.tv/en/pakistani-rupee-weakens-against-us-dollar-3/

The transition of Japanese yen (JPY) London interbank offered rates (Libor) to new benchmark rates risks falling behind the end-2021 deadline at the current pace of progress, which could delay the transition for legacy cash products and have an impact on interbank rate volatility. A more concerted push from regulators or industry groups may be needed if market inertia is to be overcome, says Fitch Ratings. https://www.fitchratings.com/research/banks/jpy-libor-transition-at-risk-of-falling-behind-schedule-24-01-2021

The new governor of the Saudi Central Bank faces the delicate task of balancing the need to preserve monetary reserves amid steep fiscal targets with potential support for Crown Prince Mohammed bin Salman’s ambitious investment plans, analysts said. New Saudi central bank chief may face monetary strains in investment push | Reuters

The Bank of Israel spent $21 billion to try to stop the shekel’s steep appreciation in 2020, with little success. How about $30 billion in 2021? Analysis – Bank of Israel vs the FX market: Can $30 billion stem the shekel’s ascent? | Reuters

Cheap money provided by central banks has been inflating assets and reshaping how we save, invest, and spend. So what’s next? https://www.bloomberg.com/news/features/2021-01-24/central-banks-are-creating-bubbles-everywhere-in-the-pandemic?sref=oriheOus

Interbank market news scan as of 12:42 am AST: #centralbanks, #financeministries

ICICI Bank on Thursday said it has executed its first interbank-money market transaction linked with Secured Overnight Funding Rate (SOFR) through its Hong Kong branch. This transaction is part of the bank’s Benchmark Transition Management plan to assess the preparedness towards a smooth transition to the new Alternative Reference Rates (ARRs), the Bank said in a statement. ICICI bank makes its first interbank-money market transaction linked with SOFR – The Hindu BusinessLine

A battle between one of Mexico’s richest men and one of its most respected institutions appears to have ended in a victory for the central bank. Billionaire Loses to Mexico Central Bank in Battle Over Cash (msn.com)

The Bank of Japan and the European Central Bank both had monetary policy meetings, but as widely anticipated, left their current policies unchanged, while pledging to continue supporting economies through the pandemic. The announcements have no impact on currencies, with financial markets trading on sentiment. https://www.fxstreet.com/news/forex-today-unimpressive-central-banks-dollar-in-trouble-202101211939

Both the Bank of Canada and European Central Bank met in recent days, setting the tone for 2021: more easing is possible, but might not be needed. https://www.dailyfx.com/forex/fundamental/central_bank_watch/2021/01/21/central-bank-watch-boc-ecb-interest-rate-expectations-update-january-21.html

The Bank of International Settlements has outlined plans to embark on a variety of CBDC trials worldwide this year. https://cointelegraph.com/news/the-central-bank-of-central-banks-is-building-a-cbdc-settlement-platform

Interbank market news scan as of 4:03 pm AST: Federal Reserve, foreign exchange,

The Federal Reserve Board on Thursday announced the approval of the reappointment of 12 Federal Reserve Bank presidents and 11 first vice presidents, as previously made by their respective boards of directors.1 Each individual has been approved to serve a new five-year term beginning March 1, 2021. Federal Reserve Board – Federal Reserve Board approves reappointment of Reserve Bank presidents and first vice presidents

The Federal Reserve Bank of New York today announced the reappointment of John C. Williams as president of the Bank. Eligible members of the New York Fed’s board of directors voted unanimously to reappoint Mr. Williams, and the Board of Governors of the Federal Reserve System approved that decision. Mr. Williams’ new five-year term begins March 1, 2021. John C. Williams Reappointed President of New York Fed – FEDERAL RESERVE BANK of NEW YORK

The Senate Finance Committee, chaired by Sen. Chuck Grassley (R-Iowa), today unanimously reported for consideration to the full Senate the nomination of Dr. Janet Yellen to the secretary of the Treasury. Chairman’s News | Newsroom | The United States Senate Committee on Finance

The Senate Committee on Commerce, Science, and Transportation will hold a hearing on Tuesday, January 26, 2021 to consider the presidential nomination of Gina Raimondo to be Secretary of the United States Department of Commerce. Nomination Hearing – U.S. Senate Committee on Commerce, Science, & Transportatio…

Janet Yellen is Jo Biden’s Treasury Secretary nominee. She claims to support “market forces” as the driver for the US dollar. What does that really mean in a practical sense? Competitive Currency Debasement 101 Class is in Session (thestreet.com)

Returning business and consumption back to normal clearly hinges on lifting lockdowns quickly. But that may also allow governments to roll back extensive supports earlier too – possibly complicating the picture for stock and bond markets, which have already largely priced recovery on the back of a flood of public rescue money used to bridge gaps in activity. Column: Vaccine races and currency wars | Reuters

Government strategy: Strong dollar versus weak dollar policy …

Earlier today, Christine Lagarde, president of the European Central Bank, gave a shout out to Janet Yellen, the U.S. Treasury-elect. President Lagarde wished Ms Yellen well on her confirmation which is expected to go favorably sometime this week. Both women have commented on the state of the foreign exchange markets this week with Dr Yellen expressing her preference for market determined foreign exchange rates and President Lagarde telling reporters during today’s European Central Bank policy rate announcement that the ECB would be monitoring foreign exchange rates “very closely.”

In its early days, the Trump administration expressed a preference for a “strong” dollar. A strong dollar scenario is one where the U.S. dollar has risen to a historically high exchange rate relative to another currency. Strength could be attributable to another nation devaluing its currency relative to the dollar in an effort to make the foreign country’s exports more competitive.

Deleveraging is another method of dollar strengthening where debts are paid off which reduces the amount of dollars in the system thus increasing the value of the dollar.

Although a strong dollar protects foreign investor holdings of U.S. assets , the higher prices for imports faced by Americans could create a political scene where consumers start asking their government to reverse the course. The prior administration’s use of tariffs in its trade spat with China raised such concerns.

While Ms Yellen has again expressed her preference for market-determined rates, her future Treasury Department could buy and sell foreign currency for the purpose of narrowing exchange rate movements should a market-determination scheme not meet the Biden administration’s policy objectives. If the dollar is viewed as depreciating too quickly, Treasury could boost demand and value by using foreign currency to buy the greenback. If the dollar is viewed as appreciating too quickly, the Treasury could resort to using the dollar to buy foreign currency. If Dr. Yellen stays the course on a market policy, then the tactic will be to allow the foreign exchange rate to move to equilibrium.

Across the Atlantic, President Lagarde will likely not just look at exchange rates but try to determine the impact rates is having on yields. The European Union has been signaling its desire to boost the status of its currency, hoping to attract more investment to the Eurozone. President Lagarde would likely want to see appreciation in the euro and an accompanying increase in yields.

Traders and brokers should pay close attention to policy moves designed to make the euro and the dollar more attractive to investors and also how the European Union positions itself between the United States and China. Depending on how competitive the United States and the European Union become, shout outs between Dr yellen and President Lagarde will become more interesting.

Government strategy: Strong dollar versus weak dollar policy …

Earlier today, Christine Lagarde, president of the European Central Bank, gave a shout out to Janet Yellen, the U.S. Treasury-elect. President Lagarde wished Ms Yellen well on her confirmation which is expected to go favorably sometime this week. Both women have commented on the state of the foreign exchange markets this week with Dr Yellen expressing her preference for market determined foreign exchange rates and President Lagarde telling reporters during today’s European Central Bank policy rate announcement that the ECB would be monitoring foreign exchange rates “very closely.”

In its early days, the Trump administration expressed a preference for a “strong” dollar. A strong dollar scenario is one where the U.S. dollar has risen to a historically high exchange rate relative to another currency. Strength could be attributable to another nation devaluing its currency relative to the dollar in an effort to make the foreign country’s exports more competitive.

Deleveraging is another method of dollar strengthening where debts are paid off which reduces the amount of dollars in the system thus increasing the value of the dollar.

Although a strong dollar protects foreign investor holdings of U.S. assets , the higher prices for imports faced by Americans could create a political scene where consumers start asking their government to reverse the course. The prior administration’s use of tariffs in its trade spat with China raised such concerns.

While Ms Yellen has again expressed her preference for market-determined rates, her future Treasury Department could buy and sell foreign currency for the purpose of narrowing exchange rate movements should a market-determination scheme not meet the Biden administration’s policy objectives. If the dollar is viewed as depreciating too quickly, Treasury could boost demand and value by using foreign currency to buy the greenback. If the dollar is viewed as appreciating too quickly, the Treasury could resort to using the dollar to buy foreign currency. If Dr. Yellen stays the course on a market policy, then the tactic will be to allow the foreign exchange rate to move to equilibrium.

Across the Atlantic, President Lagarde will likely not just look at exchange rates but try to determine the impact rates is having on yields. The European Union has been signaling its desire to boost the status of its currency, hoping to attract more investment to the Eurozone. President Lagarde would likely want to see appreciation in the euro and an accompanying increase in yields.

Traders and brokers should pay close attention to policy moves designed to make the euro and the dollar more attractive to investors and also how the European Union positions itself between the United States and China. Depending on how competitive the United States and the European Union become, shout outs between Dr yellen and President Lagarde will become more interesting.

Interbank market news scan: Central banks, foreign exchange

With more than a trillion euros in stimulus still in the pipeline to the economy, the European Central Bank left its key bond-purchase program unchanged Thursday as the 19-country eurozone endures a winter economic slowdown due to the pandemic. European Central Bank stimulus on track as economy struggles – ABC News (go.com)

The Brazilian real strengthened on Thursday as bets grew for a more hawkish stance by the country’s central bank after it removed its “forward guidance” to keep interest rates low for a long time. EMERGING MARKETS-Brazilian real rises as central bank drops ‘forward guidance’ | Nasdaq

President Biden is expected to nominate Michael Barr, a former Treasury Department official, to a top post overseeing national banks such as JPMorgan Chase & Co. and Wells Fargo & Co., according to people familiar with the decision. Biden expected to tap Michael Barr as comptroller of the currency – MarketWatch

U.S. Treasury announces members of its senior staff. Treasury Announces the Appointment of Members of Senior Staff | U.S. Department of the Treasury

21 January 2021

Interbank market news scan: As of 1:22 pm AST, Central banks, cryptocurrency, foreign exchange

Central banks across Asia are starting the year juggling policy reviews and political pressure to do more to support their economies. Asian Central Banks Start Year Juggling Politics, Policy Reviews (msn.com)

The ECB’s Governing Council, led by President Christine Lagarde, will now likely pause for the foreseeable future and use this week’s meeting to steer markets in a new direction, as well as discussing the strength of the euro. After unprecedented stimulus, the European Central Bank is set for a change of focus (msn.com)

The French central bank said on Monday it would exit from coal and limit exposure to gas and oil in its investment portfolio by 2024 as part of a shift towards more environmentally friendly assets. French central bank to exit coal, cap oil and gas investments | Reuters

Janet Yellen, who is expected to lead the Treasury Department for the incoming Biden Administration, described cryptocurrencies as a “particular concern” when it comes to terrorist financing. Biden Treasury pick Janet Yellen warns cryptocurrency poses terrorism risk (msn.com)

Even after setting a new record high of $1,439 on Monday, the rally for Ethereum’s ether cryptocurrency may have only just begun, according to Fundstrat Global Advisors strategist David Grider. Ether’s Rise to Record Highs May Propel Cryptocurrency to $10.5K: Fundstrat Global – CoinDesk

Lacalle believes that “numerous governments would be very very happy to implement strict regulations on cryptocurrencies,” noting that it is “fundamentally because, as we are seeing, cryptocurrencies are rising dramatically as a response to a very aggressive policy from central banks.” Economist Slams ECB Chief Lagarde’s Bitcoin Remarks as Dangerous for Cryptocurrency Regulation – Regulation Bitcoin News

Interbank market scan, as of 11:17 am AST: Central banks, cryptocurrency, foreign exchange

Beijing is keen to end the dollar hegemony that affords Washington vast power and ultra-low borrowing costs. It also wants to pull in more foreign capital to accelerate its economic development. Opinion | How Trump made China’s currency great again – The Washington Post

The USD/JPY bottoms are close at 102.00’s and nearly 200 pips. USD/CAD 200 pip bottoms at 1.2500’s. USD 200 pip bottoms means all currencies listed as USD/Other pair are all close to major bottoms at 200 ish pips. Currency market: USD/PLN and USD/BRL (fxstreet.com)

Brussels faces a steep climb in its effort to boost the international role of the euro as part of its quest to strengthen the EU’s self-reliance, investors and analysts said after the bloc set out new ambitions for the single currency. EU faces barriers to boosting single currency’s global status | Financial Times (ft.com)

European multinational corporations suffered the brunt of the $9.82 billion reported lost due to currency volatility in the third quarter of 2020. Kyriba’s Currency Impact Report Reveals $9.82 Billion in Total Quarterly FX Losses for European and North American Multinational Corporations (apnews.com)

The negative impact of currency fluctuations on North American company results fell sharply in 2020’s third quarter, reversing an upward trend, according to data from treasury and financial management firm Kyriba released on Tuesday. Currency Hit to North American Companies Dropped in Third Quarter: Kyriba | Investing News | US News

Banque de France has successfully conducted a central bank digital currency (CBDC) experiment using a blockchain platform for interbank settlement. French Central Bank Trials Digital Currency for Interbank Settlement | Nasdaq