Interbank market scan: Foreign exchange and Central banks …

Follow the links …

There is no doubt that the recent central bank reaction is expected given the exigency of the suffocating situation of the Nigeria economy as it struggles to keep its head above water in the devastating environment of the ravaging pandemic. The Central Bank of Nigeria recently harvested wide-ranging criticism following its sudden directives to deposit money banks to sever all dealings with account holders certified to have any dealings in digital currency. THE BAN ON DIGITAL CURRENCY | THISDAYLIVE

Twitter CEO Jack Dorsey and rapper Jay-Z want to make Bitcoin the “internet’s currency.” The two are putting their digital money where their mouths are by forming a blind trust to work on the mission. Jay Z and Twitter CEO Jack Dorsey want to make Bitcoin the ‘internet’s currency’ – CNET

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno said they are analyzing and reviewing the currency denominational structure as the country transitions into a cash-lite and non-coin society. BSP reviews currency for cash-lite, coinless society – Manila Bulletin (mb.com.ph)

London was overtaken by Amsterdam as the main European market centre in January, as more shares were traded in the Dutch capital. London dominating EU with almost half of world’s currency trading despite Amsterdam surge (msn.com)

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 10:09 pm EST Exchange Rate as of 14 February 2021(2)
AUD/USD0.7656 0.7768
USD/CAD1.2781 1.2678
USD/CNY6.4664 6.4542
EUR/USD1.2035 1.2128
USD/INR72.8500 72.5700
GBP/USD1.3714 1.3868
USD/JPY105.4400 105.0400
USD/MXN20.1300 19.9154
USD/DKK6.1785 6.1338
USD/NOK8.5428 8.4263
Sources: Federal Reserve (1) ; Reuters (2)

The banking system and community reinvestment

The following comment was filed today with the Board of Governors of the Federal Reserve:

Board of Governors of the Federal Reserve System

Docket No. 12-1723 and RIN 7100-AF94

Comment

Introduction

The following comment is filed in response to an Advance Notice of Proposed Rulemaking (“ANPR”) issued by the Board of Governors of the Federal Reserve System (“Board”).  This comment addresses Question 1 in the ANPR which asks the following:

“Does the Board capture the most important Community Reinvestment Act (“CRA”) modernization objectives? Are there additional objectives that should be considered?” 

The answer to this question is no, the Board does not capture the most important CRA modernization objective and that an additional objective should be considered.  The most important objective this modernization initiative should capture is to expressly define what is meant by the word “community.”  Neither rule or statute defines the word “community”, and the Board should use its rulemaking to expressly define the term.  By expressly defining “community”, targeted credit will be created leading capital to flow to its most productive use, generating returns for community resources and the lending banks, and aiding the Board of meeting its dual mandate of price stability and full employment.

Argument

No amendment to 12 CFR Part 228 Community Reinvestment (Regulation BB) can be made until the term “community” is properly defined.  The lack of clarity in the definition could result in capital not flowing to entities that can leverage capital to produce income, employment, and returns to and of capital. 

To create a sustainable, stable, and prosperous Caribbean American community in the United States, it is important that banks, as information search agents and intermediaries between savers and entrepreneurs, be able to identify the resources that can be employed to generate stable income and returns to capital. Race, ethnicity, and even income itself should not be the prime information targets for banks.  Banks should be targeting communities that are built on resources i.e., mining, farming, creative associations, manufacturing, etc., where the controlling interests of these resources or activities are controlled primarily by minority groups and employment resulting from exploitation of these resources or activities flow to members of minority groups with controlling interest in the resources or activities.

Targeting capital and credit merely toward income groups will dilute the impact capital and credit can have on increasing income for and employment of minority groups tied directly to resources and activities that generate income.  In other words, it would be a waste of capital merely to approve credit for any borrower who does not have an ownership interest in the resource that the community relies on.

In addition, from a cost-benefit perspective, there would be less waste of funds where credit is targeted to a resource based on present value of a future income stream from a community-owned asset.  The Board would be able to better quantify returns on the investment by accounting for jobs created by the exploitation of a community-owned asset.  By accounting for returns to the investment and jobs created, the Board has another factor to consider when meeting its mandate of full employment and stable prices.

Conclusion

To get to this point, where the Community Reinvestment Act of 1977, helps the Board meet its dual mandate, the Board should recommend changes in the statute that expressly defines community as an association of ethnic minorities built on the ownership or control of an income-generating resource or asset.  This stricter definition would better target credit and capital to an activity that is generating income and employment for an ethnic group on a whole.  

Interbank market scan: Central Banks and Foreign Exchange … and the year of the Ox.

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In a sign of continued maturity as a macro asset, bitcoin now looks to be leading the price action in the foreign exchange markets (FX). Bitcoin Starting to Lead FX Markets, Analysis of Tesla Reaction Shows: Report – CoinDesk

Group of Seven finance ministers are expected on Friday to back a new allocation of the International Monetary Fund’s own currency, or Special Drawing Rights, to help low-income countries hit by the coronavirus pandemic. GRAPHIC-Which countries would benefit most from an IMF SDR increase (msn.com)

World shares dipped on Friday as investors awaited progress towards more U.S. fiscal stimulus, while the dollar was set for a weekly loss and cryptocurrency Bitcoin hit a record high. World shares dip and Bitcoin hits record high – Metro US

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 12:31 pm EST Exchange Rate as of 12 February 2021(2)
AUD/USD0.7656 0.7725
USD/CAD1.2781 1.2694
USD/CNY6.4664 6.4542
EUR/USD1.2035 1.2124
USD/INR72.8500 72.6000
GBP/USD1.3714 1.3855
USD/JPY105.4400 104.9500
USD/MXN20.1300 19.9320
USD/DKK6.1785 6.1496
USD/NOK8.5428 8.4958
Sources: Federal Reserve (1) ; Reuters (2)

Interbank market news scan: Central banks and inequality …

While the economic recovery around the world remains uneven, fragile, and unbalanced across sectors, financial markets are generally doing very well, thanks! In the United States, only half of the unemployment caused by the pandemic last year has been reversed, while stock markets continued to boom. Of course, this largely reflected the extraordinary support given by monetary authorities since March last year. Central Banks and Inequality – Economic News, Analysis, and Discussion (thestreet.com)

Interest in bitcoin and other cryptocurrencies may be surging, but central banks don’t want to be left behind by financial innovation. In fact, more than 80% are examining how to launch digital versions of their own currencies. Why central banks want to launch digital currencies (msn.com)

Mexico’s central bank on Thursday cut its benchmark interest rate for the first time since September, flagging uncertainty over the economic outlook and global efforts to tackle the COVID-19 pandemic. Mexico Central Bank Cuts Interest Rates, Says Outlook Uncertain | Investing News | US News

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 12:38 pm EST Exchange Rate as of 11 February 2021(2)
AUD/USD0.7656 0.7749
USD/CAD1.2781 1.2689
USD/CNY6.4664 6.4542
EUR/USD1.2035 1.2121
USD/INR72.8500 72.7080
GBP/USD1.3714 1.3820
USD/JPY105.4400 104.6800
USD/MXN20.1300 19.9915
USD/DKK6.1785 6.1327
USD/NOK8.5428 8.4619
Sources: Federal Reserve(1) ; Reuters(2)

11 February 2021 8:41 pm EST

Interbank market news scan: Central banks

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China leads in precision-guided central banking. Does it work? https://www.economist.com/finance-and-economics/2021/02/13/china-leads-in-precision-guided-central-banking-does-it-work

Burkhard Balz of Deutsche Bundesbank on the future of central bank-issued digital currency. https://www.bis.org/review/r210211e.htm

Francois Villeroy de Galhou of the Bank of France on central banks’ role in the greening of the economy. https://www.bis.org/review/r210211g.htm

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 12:38 pm EST Exchange Rate as of 11 February 2021(2)
AUD/USD0.7656 0.7749
USD/CAD1.2781 1.2689
USD/CNY6.4664 6.4542
EUR/USD1.2035 1.2121
USD/INR72.8500 72.7080
GBP/USD1.3714 1.3820
USD/JPY105.4400 104.6800
USD/MXN20.1300 19.9915
USD/DKK6.1785 6.1327
USD/NOK8.5428 8.4619
(1)Federal Reserve; (2) Reuters

11 February 2021

Interbank market news scan: Can central banks play social justice warrior? Are traders prepared for a rate increase?

Banks now tackle diverse issues, be it Covid-19, climate change or inequality. Purists may disagree but there’s no other option. Central banks aren’t what they used to be – and the better for it | Business | The Guardian

After standing shoulder-to-shoulder for much of the pandemic, traders are preparing for the day the world’s central banks begin to move apart on policy. Traders Map Out Day When Central Banks Finally Raise Rates (msn.com)

Lawmakers in Brazil vote to grant their central bank autonomy. Brazil passes law giving autonomy to central bank | Financial Times (ft.com)

A top Bank of Canada official called the recent spike in cryptocurrency prices “speculative mania,” and said such assets don’t have the qualities to become the money of the future. Crypto Boom Is ‘Speculative Mania,’ Bank of Canada Deputy Says (msn.com)

Sudan’s new cabinet faces pressure to push through rapid currency reform or risk endangering its path to debt relief and to international financial support for its shaky political transition, diplomats and analysts say. Analysis: Delay in currency reform puts donor support for Sudan at risk | Reuters

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 3:31 am EST Exchange Rate as of 11 February 2021(2)
AUD/USD0.7656 0.7744
USD/CAD1.2781 1.2676
USD/CNY6.4664 6.4557
EUR/USD1.2035 1.2124
USD/INR72.8500 72.7700
GBP/USD1.3714 1.3830
USD/JPY105.4400 104.5800
USD/MXN20.1300 19.9970
USD/DKK6.1785 6.1332
USD/NOK8.5428 8.4650
Sources: (1) Federal Reserve, (2) Reuters

Interbank market scan: Lagarde sees holding crypto as “unlikely.” Central Bank of Nigeria explains “no to crypto.” India pursues crypto law

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European Central Bank President Christine Lagarde on Wednesday said she didn’t consider bitcoin to be a real currency, adding that central banks won’t be holding it as reserve currency anytime soon. ECB president Christine Lagarde says it’s ‘very unlikely’ that central banks will hold bitcoin in the near future (msn.com)

Following its ban on cryptocurrency-related transactions in the country, the Central Bank of Nigeria has explained why it was done. CBN  boss disclosed that the digital currency is used for money laundering and terrorism. CBN explains why cryptocurrency transactions were banned (withinnigeria.com)

Kingsley Moghalu, former deputy governor of the Central Bank of Nigeria (CBN) has condemned the apex bank’s reason for stopping cryptocurrency transactions in the country. Moghalu condemns CBN’s reason for banning cryptocurrency transactions (withinnigeria.com)

On Tuesday (February 9), minister of state for finance Anurag Singh Thakur said that a cryptocurrency bill was being finalised and it would be sent to Union Cabinet soon. Cryptocurrency bill: Here’s what you need to know (msn.com)

Are central banks on the verge of a currency war with the U.S? Global central bank interventions raise specter of ‘currency war’ | Morningstar

“Bitcoin needs a couple more big endorsements, and that could be the key to take prices above the $50,000 level,” Edward Moya, senior market analyst for the foreign-exchange broker Oanda, wrote Tuesday.  First Mover: As Wall Street Fixates on Inflation Hedges, Good Luck Finding Bitcoin | Nasdaq

Bitcoin ‘can’t be stopped’: Nigerians look to peer-to-peer exchanges after crypto ban. Some Nigerians plan to continue using bitcoin and other cryptocurrencies despite a directive issued by the Central Bank of Nigeria last week ordering banks to close down accounts associated with cryptocurrencies. First Mover: As Wall Street Fixates on Inflation Hedges, Good Luck Finding Bitcoin | Nasdaq

The Federal Reserve Board on Tuesday announced the second extension of a rule to bolster the effectiveness of the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). Like the earlier extensions, this one will temporarily modify the Board’s rules so that certain bank directors and shareholders can apply to their banks for PPP loans for their small businesses. Federal Reserve Board – Federal Reserve Board announces the second extension of a rule to bolster the effectiveness of the Small Business Administration’s Paycheck Protection Program (PPP)

Currency pairsExchange Rate as of 4:15 pm 8 February 2021 As of 1:00 pm EST Exchange Rate as of 10 February 2021
AUD/USD0.7656 0.7727
USD/CAD1.2781 1.2690
USD/CNY6.4664 6.4576
EUR/USD1.2035 1.2134
USD/INR72.8500 72.8500
GBP/USD1.3714 1.3841
USD/JPY105.4400 104.6600
USD/MXN20.1300 20.0543
USD/DKK6.1785 6.1317
USD/NOK8.5428 8.4504
Sources: Federal Reserve, Reuters

10 February 2021

Interbank market news scan: Central banks, foreign exchange; cryptocurrency …

In the news …

According to preliminary statistics, outstanding aggregate financing to the real economy (AFRE) reached RMB289.74 trillion at end-January, increasing 13 percent year on year. Report on Aggregate Financing to the Real Economy (Stock) (January 2021) (pbc.gov.cn)

According to preliminary statistics, the aggregate financing to the real economy (AFRE) (flow) was RMB5.17 trillion in January 2021, up RMB120.7 billion year on year (y-o-y). Report on Aggregate Financing to the Real Economy (Flow) (January 2021) (pbc.gov.cn)

Consolidated financial statement of the Euro System. Consolidated financial statement of the Eurosystem (europa.eu)

The European Central Bank (ECB) announces today that it will begin publishing aggregate results of its Survey of Monetary Analysts (SMA) in June 2021. The survey, an ECB staff-level exercise, collects information on market participants’ expectations about the future evolution of key monetary policy parameters, financial market variables and the economy. The survey runs eight times a year and is aligned with the six-week schedule of the monetary policy meetings of the Governing Council. ECB to publish results of the Survey of Monetary Analysts (europa.eu)

The Bank and FCA held a consultation with FMIs and reviewed their co-operation regarding market infrastructure – seeking in particular feedback on how the authorities had co-operated during the Covid market events of Spring 2020. The authorities concluded that the MoU’s arrangements for co-operation remain effective, with appropriate co-ordination and no material duplication. Industry respondents acknowledged the efforts made on co-operation and the Bank and FCA remain committed to effective co-operation. Update on Bank of England and Financial Conduct Authority Memorandum of Understanding on the supervision of market infrastructure and payment systems | Bank of England

Reserve Bank of Australia releases official reserve assets picture. Official Reserve Assets – January 2021 | RBA

10 February 2021, 4:08 am EST

Interbank market news scan: Tesla adds bitcoin to its balance sheet; Central banks, foreign exchange, cryptocurrency …

In the news …

Tesla’s move to invest $1.5 billion in bitcoin further solidifies cryptocurrency as an emerging reserve currency for technology companies. Tesla’s $1.5 billion bitcoin purchase points to crytocurrency as tech company reserve currency | ZDNet

The Group of Seven (G7) financial leaders would kick off debate on Friday on emerging market debt problems, implementation of digital taxation and central bank digital currency, Japanese Finance Minister Taro Aso said on Tuesday. Japan finance minister: G7 focus on emerging market debt, digital taxation and digital currency | Reuters

The French economy is still on course to rebound 5% this year despite the uncertainty created by the coronavirus pandemic, the head of the central bank said on Tuesday, reiterating its December forecast. French economy still on track for 5% growth this year: central bank (msn.com)

The U.S. Federal Reserve is beginning to incorporate the impacts of global warming into its regulatory writ, following in the footsteps of its global peers, according to a paper published Monday by the San Francisco Fed. Fed to weave ‘inescapable’ climate change risk into bank oversight (msn.com)

The Central Bank of Ireland (CBI) has told investment firms to beef up their surveillance of insider trading and market manipulation this year or face fines and other sanctions from the regulator. Central Bank aims to curb abuse as amateurs flood markets (msn.com)

Emerging market central banks delivered just one interest rate cut in December, signalling the fading out of an easing cycle that had started in 2019 and had exceeded the cuts during the 2008 financial crisis and the 2010 euro crisis. Emerging market central bank rate cuts fade further in January | Reuters

2:33 am EST, 9 February 2021

Interbank market scan: Elon Musk, the market mover; China serious about its digital currency; Central banks, foreign exchange, cryptocurrency

In the news ….

China’s new bank loans are expected to surge to a record high in January on a seasonal boost, a Reuters poll showed, while credit growth may be constrained by some marginal tightening of monetary policy as the central bank focuses on preventing risks. China’s January yuan loans seen at record high, central bank to cool credit growth in 2021: Reuters poll | Reuters

Nigeria’s central bank said it ordered deposit-taking banks and other financial institutions to close accounts dealing in cryptocurrencies because it was threatening the country’s financial system. Nigeria Central Bank Says Cryptocurrencies Were A Threat – Bloomberg

The Central Bank of Nigeria (CBN) issued a five-page statement Sunday clarifying its position on cryptocurrencies after a regulatory warning to local banking institutions on Friday sent shockwaves through social media. Nigerian Central Bank Says Its Ban on Crypto Accounts Is Nothing New | Nasdaq

Beijing and Suzhou will issue a total of 40 million yuan (US$6.2 million) in the latest trials of the nation’s digital currency this week in a bid to boost consumption over the upcoming Lunar New Year holiday. China digital currency: Beijing, Suzhou confirm latest trials as e-yuan tests top 100 million yuan | South China Morning Post (scmp.com)

Tesla and SpaceX CEO Elon Musk thinks crypto could be the future but his choice of token might not be Bitcoin, the dominant cryptocurrency. Elon Musk Hints At ‘Ironic’ Possibility Dogecoin Becomes A ‘Real Currency’ (ibtimes.com)

Hopes for the U.S. economic recovery seem to be transforming the dollar from a haven asset to the risk-on currency of choice. Dollar Morphs Into Risk-On Currency Amid U.S. Growth Hopes – Bloomberg

In making the case for a mammoth $1.9 trillion economic relief package, President Joe Biden and his acolytes had maintained that economists across the board agreed that now is the time to go big in the fight against the pandemic. Well, so much for that. A number of prominent economists and former policy makers — from Democrat Lawrence Summers to Republican Douglas Holtz-Eakin — have raised questions in the past week about the size of the package. So too have some economy watchers in the financial markets. Yellen, Summers Spar About Overheating Risk in Stimulus Plan – Bloomberg

Taiwan penalized Deutsche Bank AG and three other foreign lenders after a probe into speculation on the surging local currency last year involving grain companies. Taiwan Penalizes Deutsche Bank, 3 Others for Currency Trades (msn.com)

8 February 2021, 8:12 am EST