Interbank market news scan: Latest central bank, cryptocurrency, forex news links.

Bitcoin could be at risk of a further drop unless the digital coin climbs back above $40,000 soon. JPMorgan Strategists Say $40,000 Is Key Test for Bitcoin Boom – Bloomberg

Janet Yellen is expected to affirm the U.S.’s commitment to market-determined dollar value and give assurances that the U.S. won’t seek a weaker dollar for competitive trade advantage, the Wall Street Journal reported, citing Biden transition officials familiar with her preparation for her confirmation hearing. Yellen to Affirm Commitment to Market-Determined Dollar: WSJ – Bloomberg

Asian stocks dipped along with U.S. equity futures as investors greeted the week with a lack of risk appetite and traders looked ahead to data on the progress in China’s economic recovery. The dollar edged up. Stock Market Today: Dow, S&P Live Updates for Jan. 18, 2020 – Bloomberg

A stronger U.S. dollar is proving to be an early test for emerging-market currencies on the eve of Joe Biden’s inauguration. Emerging Markets Tested by Rising Dollar Ahead of Biden’s Return – Bloomberg

Oil extended losses in Asia on a stronger dollar and a still-surging coronavirus after slumping the most in almost four weeks on Friday following the release of disappointing U.S. economic data. Oil Extends Losses on Stronger Dollar and Still-Surging Virus – Bloomberg

The results of the first of the 24 forward foreign exchange auctions scheduled by the Bank of Ghana for 2021 indicate that the local forex market remains confident that the cedi will hold its own against the United States dollar at least through to the end of the first quarter of the year. Forex market expects stable 1st Quarter exchange rate (ghanaweb.com)

It has always been about speculation …

To understand the trade of currency is to understand the need for speculation. Speculation has always been about managing the future, managing fear. Speculation is about ramping up the future value of currency in order to protect yourself, your knowledge, your property. You make bets that your value will grow. What we produce is merely manifestation of how well we protect ourselves going forward, and the more secure we are in the yield from our labor and the infrastructure on which we exchange value, the greater our currency.

It’s not a gamble when we speculate. It’s not a fool’s errand. It is a natural outgrowth of the prism of fear through which man views his world. Until we get rid of the fear, we will always speculate….

US waits for Senate election results from Georgia; strength of US dollar against European, African currencies a mixed bag …

PairsOANDA as of 4 January 2021OANDA as of 6 January 2021Notes
USD/KES108.391108.461Dollar flat
USD/NGN384.938381.690Dollar weakening
USD/GHS5.85245.85693Dollar flat
USD/CDF1950.611950.01Dollar flat
USD/AOA648.310649.149Dollar flat
USD/ZAR14.630914.8552Dollar strengthening
Source: OANDA

Meanwhile, as the count in Georgia comes to a close, yields on longer term notes begin to increase as the Senate gets closer to a 50-50 split and the likelihood of more spending under a Biden administration ….

RatesFederal Reserve as of 4 January 2021Bloomberg as of 6 January 2021 10:30 am AST
Federal Funds Rate0.090.08
Prime Rate3.253.25
3-month Treasury0.090.08
2-year Treasury0.110.13
10-year Treasury0.931.02
30-year Treasury1.661.78
Source: Federal Reserve, OANDA

And the buzz phrase again mid-week is dollar weakening as exchange rates for a number of foreign exchange pairs continues to fall. This in light of disappointing jobs numbers from ADP where the payroll company determined that 123,000 jobs were lost in December 2020.

PairsFederal Reserve as of 4 January 2021OANDA as of 4 January 2021OANDA as of 6 January 2021 10:45 am AST
GBP/USD1.36621.36331.35967
USD/CAD1.27531.27261.27269
USD/CNH6.52506.45526.43929
USD/DKK6.08396.06576.05823
EUR/USD1.22301.22641.22774
USD/INR73.010072.936773.0696
USD/MXN19.892019.838219.9091
USD/JPY103.1900103.02102.36
USD/NOK8.57578.53008.50760
USD/SEK8.20958.20918.20299
USD/CHF0.88410.88150.87959
Source: OANDA

As of 9:59 an AST, foreign exchange in holding pattern as the United States watches the U.S. senate run-offs in Georgia

PairsFederal Reserve as of 4 January 2021OANDA as of 4 January 2021OANDA as of 5 January 2021
GBP/USD1.36621.36331.36329
USD/CAD1.27531.27261.27260
USD/CNH6.52506.45526.45524
USD/DKK6.08396.06576.06566
EUR/USD1.22301.22641.22636
USD/INR73.010072.936772.9367
USD/MXN19.892019.838219.8382
USD/JPY103.1900103.02103.02
USD/NOK8.57578.53008.53002
USD/SEK8.20958.20918.20912
USD/CHF0.88410.88150.88150
Board of Governors of the Federal Reserve, OANDA

Regulatory news impacting foreign exchange

None at this time…

As of 9:57 am AST, foreign exchange rates show dollar weakness for certain currencies over last eight days.

PairsFederal Reserve as of 23 December 2020OANDA as of 23 December 2020OANDA as of 31 December 2020
GBP/USD1.35101.34491.35772
USD/CAD1.28411.28721.27812
USD/CNH6.54006.53236.50832
USD/DKK6.09896.10316.05598
EUR/USD1.21941.21851.22824
USD/INR73.770073.731673.1525
USD/MXN20.080020.087819.8843
USD/JPY103.5200103.50103.24
USD/NOK8.63078.68868.56439
USD/SEK8.28418.30368.18564
USD/CHF.8882.8886.88284
Source: OANDA, Board of Governors of the Federal Reserve

Legal Events Impacting Pricing of or Ability to Enter Foreign Exchange Markets

No events to report

As of 3:24 pm AST, foreign exchange rate movement in a wait and see pandemic relief environment of the US Senate

PairsFederal Reserve as of 23 December 2020OANDA as of 23 December 2020OANDA as of 29 December 2020
GBP/USD1.35101.34491.35070
USD/CAD1.28411.28721.28431
USD/CNH6.54006.53236.52721
USD/DKK6.09896.10316.08792
EUR/USD1.21941.21851.22140
USD/INR73.770073.731673.4425
USD/MXN20.080020.087819.9413
USD/JPY103.5200103.50103.64
USD/NOK8.63078.68868.63352
USD/SEK8.28418.30368.26356
USD/CHF.8882.8886.88947
Source: OANDA

Legal/Political Events Impacting Foreign Exchange

US Senate ponder Covid relief bill during rare holiday time in Washington

As of this writing, the U.S. Senate is in session debating the COVID-19 pandemic relief bill. One core issue: whether $600 in taxpayer aid should be increased to $2,000. Speaking on the Senate floor, Senator Dick Durbin, Democrat of Illinois, reiterated that the additional aid is needed immediately and that these funds won’t be put away for a rainy day but will be injected immediately into jump starting the economy. As of 3:30 pm AST, the Senate was still making its quorum call and waiting for additional senators to speak. President Donald Trump threw a wrench into the relief discussions when he expressed support for $2,000 per eligible taxpayer.

Two Republicans in the Senate, brought additional attention to themselves by joining the President in support of increasing monetary support. Senator Kelly Loeffler and Senator David Perdue, both of Georgia, are facing tough run-off elections scheduled for 5 January 2021.

As of 11:34 pm AST, the US dollar in terms of Caribbean currencies is flat to strengthening with some volatility …

Pairs OANDA as of 18 December 2020 OANDA as of 23 December 2020 Notes 
USD/BBD 2.00 2.00 Pegged to the US dollar 
USD/TTD 6.6719 6.68062 Dollar strengthening 
USD/JMD 141.803 141.973 Over the last 30 days, exchange rate fell from 145.825 
USD/XCD 2.70 2.70 Pegged to the US dollar 
USD/GYD 205.239 205.570 Although risen from 204.934 on 23 November, the rise has been accompanied by volatility. 

Source: OANDA

Legal/Political events impacting US-Caribbean foreign exchange

President Trump modifies Harmonized Tariff System to reflect extension of Caribbean Basin Initiative

On 22 December 2020, President Donald J Trump announced a modification of the Harmonized Tariff System for the purpose of including the extension of the Caribbean Basin Initiative signed into law last October. The proclamation read as follows:

“The Caribbean Basin Economic Recovery Act, as amended (the “CBERA”), (title II of Public Law 98-67, 97 Stat. 384 (19 U.S.C. 2701 et seq.)), instituted a duty preference program that applies to a product of a Caribbean Basin country that has been designated by the President as a beneficiary country. On October 10, 2020, the President signed into law the Extension of the Caribbean Basin Economic Recovery Act (Public Law 116-164, 134 Stat. 758), which extends certain preferential tariff treatment accorded under the CBERA to September 30, 2030. I have determined, pursuant to section 604 of the Trade Act, that it is necessary to modify the HTS to reflect the extension of the CBERA.”

According to the U.S. International Trade Commission, the Harmonized Tariff Schedule is made up of a hierarchical structure for describing all goods in trade for duty, quota, and statistical purposes.

Sources: Executive Office of the President; U.S. International Trade Commission

As of 6:01 am AST, the American dollar shows signs of strength even as Trump hints of relief bill veto …

Pairs Federal Reserve as of 18 December 2020 OANDA as of 18 December 2020 OANDA as of 23 December 2020 
GBP/USD 1.3497 1.3520 1.33917 
USD/CAD 1.2776 1.2760 1.28855 
USD/CNH 6.5395 6.5197 6.53796 
USD/DKK 6.0798 6.0731 6.09361 
EUR/USD 1.2236 1.2248 1.22053 
USD/INR 73.5300 73.4139 73.8348 
USD/MXN 19.9813 19.8978 20.0804 
USD/JPY 103.3500 103.35 103.49 
USD/NOK 8.5959 8.5878 8.68615 
USD/SEK 8.2786 8.2747 8.28832 
USD/CHF .8850 .8844 .88724 

Legal/Political events impacting foreign currencies

Trump wants more money for taxpayer households

Bloomberg reporting today President Donald J. Trump’s concerns that the pandemic relief package approved by Congress does not go far enough in providing aid to households. The President would like the current proposed amount of $600 relief for an individual increased to $2,000. Mr Trump has not definitively said that he will veto the $900 billion package which is due for his signature by 28 December.

In a 5G world, can an individual be their own bank?

A thought ….

That Covid-19 has sped up the exposure of workers to the possibility of automation replacing them is a saying that is becoming almost cliché. Television commercials remind us that we are “all in this together” and that we should wear masks and safely social distance. Meanwhile, telecommunications companies are promoting 5G technology that when fully deployed will help alleviate the downsides of working from home with a technology that moves data faster and can help connect all your devices and appliances so that you can better manage the data flowing through your home. But what if, in addition to connecting your mobile phone to your refrigerator which may allow you to determine whether to buy more milk, that 5G also helps to turn you into a micro bank by taking a real-time audit of the assets in your possession and using them as a basis for issuing your own coin?

The thought came to me today while conversing with two friends about the probability of Facebook becoming its own “nation.” Facebook, the world’s largest social media platform, is backing a group that plans to issue a cryptocurrency next month called Diem. Diem will hopefully help people send money around the world almost instantaneously. Unlike other cryptocurrencies, Diem will be a “stable coin” meaning it will be backed by reliable fiat currencies like the U.S. dollar or the euro.

But what if we could take the Facebook macro-model and make it micro to you? For example, with 5G-driven internet of things and block chain technology, why couldn’t a real time audit of a person’s possessions be taken and instead of the individual issuing digital fiat currency or even stable coin, the individual could issue their own personal currency. Tom Steyer, for example, could digitally tally up his cash, land, securities, and other holdings and issue a digital certificate that could be used in the digital marketplace. A man of his wealth could take a position in a number of different currencies but should he choose to engage exclusively in the digital world on his own dime, he could do so without any rules or regulations that come along with currency issued by a nation-state, a social media platform, or a corporation.

The advantages to such a scheme compound when more people with the material means decide to go digital and trade either the social media platform’s coin or, if affluent enough, their own coin. This would be true personal banking.

U.S. Treasury declares Switzerland, Vietnam as currency manipulators …

Press Release

December 16, 2020

WASHINGTON – The U.S. Department of the Treasury today delivered to Congress the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States. In this Report, Treasury reviewed and assessed the policies of 20 major U.S. trading partners during the four quarters ending June 2020.

The Report concluded that both Vietnam and Switzerland met all three criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (the 2015 Act) during the period under review. Treasury consequently conducted enhanced analysis of Vietnam and Switzerland in the Report and will also commence enhanced bilateral engagement with each country in accordance with the 2015 Act. This engagement will include urging the development of a plan with specific policy actions to address the underlying causes of currency undervaluation and external imbalances.

Treasury also determined that, under the Omnibus Trade and Competitiveness Act of 1988 (the 1988 Act), both Vietnam and Switzerland are currency manipulators. For each country, Treasury assessed, based on a range of evidence and circumstances, that at least part of its exchange rate management over the four quarters through June 2020, and particularly foreign exchange intervention, was for purposes of preventing effective balance of payments adjustments and, in the case of Vietnam, for gaining unfair competitive advantage in international trade as well. Consistent with the 1988 Act, Treasury will press for the adoption of policies that will permit effective balance of payments adjustments and eliminate the unfair advantages in trade that result from their actions.

No other major U.S. trading partner met the relevant 1988 or 2015 legislative criteria for currency manipulation or enhanced analysis during the relevant period. Treasury urged China to improve transparency with respect to the management of its exchange rate, in particular regarding official foreign exchange intervention, and increase public understanding of the relationship between the PBOC and the foreign exchange activities of the state-owned banks, including the use of foreign exchange derivatives and activities in the offshore RMB market.

“The Treasury Department has taken a strong step today to safeguard economic growth and opportunity for American workers and businesses,” said U.S. Treasury Secretary Steven T. Mnuchin. “Treasury will follow up on its findings with respect to Vietnam and Switzerland to work toward eliminating practices that create unfair advantages for foreign competitors.”

Treasury found that ten economies warrant placement on Treasury’s “Monitoring List” of major trading partners that merit close attention to their currency practices: China, Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand, and India, the last three being added in this Report.

Today’s Report is submitted to Congress pursuant to the Omnibus Trade and Competitiveness Act of 1988, 22 U.S.C. § 5305, and Section 701 of the Trade Facilitation and Trade Enforcement Act of 2015, 19 U.S.C. § 4421. Treasury continues to work actively to dismantle unfair barriers to trade and achieve freer and more reciprocal trade with major U.S. trading partners. This includes combatting unfair currency practices that facilitate competitive advantage, such as unwarranted intervention in currency markets.

Source: U.S. Department of the Treasury