Interbank Market News Scan : A thought on creating an Afro-American currency …

My morning takeaway …

I think a currency should reflect the reality of the relationship between two distinct political economies that reside under a single flag.  I am specifically concerned with two groups under the American flag: Afro-America and the Virgin Islands of the United States.  Neither group have been fully incorporated into the American political economy.  There is only a 47-year difference between their starting attempts at incorporation into the United States with Afro Americans, at least on the surface, holding a lead in political-economic corporation due primarily to their physical presence in the contiguous United States, their 43 million population, and thus greater access to political channels.

Both Virgin Islanders and the Afro-American community have disproportionately higher poverty rates, lower incomes, and higher unemployment rates than their white American counterparts.  Both communities suffer from a dearth of capital and lack productive capacity, for now, through which they could independently sustain themselves.  Their banking markets are, like the rest of the United States, subject to the Federal Reserve, and the lip service of the Fed’s community development initiatives and the Community Reinvestment Act of 1977.

A priori, neither community draws the attention of family offices, hedge funds, investment banks, or individual trading desks in search of margin that supports any trade, including foreign exchange.  This is due primarily to both communities not having sufficient pooled natural and human resources upon which a currency (value or “energy”) can be calculated and leveraged.

Then again, under a credit creation theory of banking, this may not matter where credit, money, margin, are created out of thin air … but more on that at some other time.

In the mean-time I thought it would be interesting to add two proxy foreign exchange rates reflecting the currency of the Virgin Island (USVI) and Afro-American (AfAM) communities.  It is my endeavor, amongst too many others, to develop them in the near future …

20 May 2021

Currency PairsRates as of 2:00 pm GMT 20 May 2021Rates as of 12:44 pm GMT 19 May 2021
GHS/EUR0.14180.1419
GMD/EUR0.01610.0159
NGN/EUR0.00200.0020
SLL/EUR0.00010.0001
KES/EUR0.00750.0076
RWF/EUR0.00080.0008
ZAR/EUR0.05830.0584
MZN/EUR0.01370.0137
XCD/EUR0.30330.3033
USVI/USD0.00010.0001
AfAM/USD0.10000.1000
Source: OANDA, Alton Drew

Links you should follow …

Banks.  Three of the biggest US banking groups want the US Department of Agriculture to reconsider the terms of billions of dollars in planned debt relief for minority farmers, claiming it will cut into banks’ profits — and warn they may have to cut those same farmers off from future loans.  Banks say USDA’s debt forgiveness for minority farmers will cost them money and could affect future loans. Black farmers call that a threat. (msn.com)

Banks. Australian stocks closed higher on Thursday, marking their steepest rise in nearly two weeks, due to gains in tech and banking stocks and upbeat employment data.  Australian shares see best day in nearly 2 weeks on jobless data, banks boost | Nasdaq

Banks. In an effort stemming from the murder of George Floyd and at the behest of a Connecticut state official, a who’s who of financial institutions on Tuesday promised to address the effects of racial disparities in financial services by investing billions of dollars to support Black and Latinx communities. A state treasurer convinced big banks to commit billions of dollars to tackle racial inequities. This is the result. (msn.com)

Banks. Mike Mayo, Wells Fargo Securities senior banking analyst, joins ‘Power Lunch’ to discuss the competition banks could be facing from fintech, the future of bank branches and more. Banks are headed toward record efficiency, says Wells Fargo’s Mike Mayo (msn.com) Banks, central banks, digital currency. Can crypto benefit central banks? 3 ways digital currencies backed by central banks could benefit the global economy, according to Fitch (msn.com)

Central banks. The Bahamas became a global leader in e-money last year when it launched one of the world’s first central bank digital ­currencies—the “sand dollar”—beating China’s “digital renminbi” to the market by six months. How the Tiny Bahamas Beat Global Giants in the E-Currency Race (msn.com)

Interbank market news scan: Major G-10 currencies split on growth with Swiss, Norwegian, and Swedish currencies depreciating…

The Swiss franc, Norwegian krone, and Swedish kroner ended this week depreciating the most against the US dollar. More later today as to the political, economic, central bank, and commodity price information that not only impacted the market but that brokers should be sharing to help maintain fairness and integrity in the foreign exchange market.

Currency pair22 March 202125 March 2021Percentage change
EUR/USD1.19131.1798-.96
AUD/USD0.77340.7592-1.84
GBP/USD1.38511.3712-1.00
USD/JPY108.765109.0580.27
NZD/USD0.71610.6966-2.7
USD/CHF0.92620.93721.19
USD/NOK8.52218.61381.08
USD/SEK8.53018.62931.16
USD/CAD1.25091.25880.63
Source: OANDA

For US major trade partners, a mixed bag on their costs for the dollar …

The top twelve destinations for U.S. exports are Canada, Mexico, China, Japan, Great Britain, France, Germany, Belgium, South Korea, Norway, Brazil, and Taiwan. There has been a mixed bag in terms of increases or decreases in each country’s cost of the US dollar since the beginning of 2021. Using currency data from OANDA, we identified the rate changes between 1 January 2021 and 18 March 2021.

Currency pair1 January 202118 March 2021Percentage change
USD/CAD1.27411.2450-2.3
USD/MXN19.883320.59713.6
USD/CNY6.52776.5006-0.4
USD/JPY103.1600109.07005.7
USD/GBP0.73250.7189-1.9
USD/EUR(1)0.81530.83882.9
USD/KRW1,086.10001,128.13003.9
USD/NOK8.54548.4699-0.9
USD/BRL5.19165.62088.2
USD/TWD28.077228.27240.7
Source: OANDA

(1) France, Germany, and Belgium use the euro as their currency. We refer to them collectively as the Eurozone.

Since January, countries seeing their currencies significantly strengthen against the dollar are Canada and Great Britain. On the other hand, Mexico, Japan, the Eurozone, South Korea, and Brazil have seen their currencies significantly weaken, making their cost to import U.S. product more expensive.

The primary mover of currency rates is supply and demand. The increased price of the dollar could be a result of this basic economic principal. Changes in bond yields may also have an impact on currency pricing as well as changes in policy rates imposed on banks due to their central banks’ policy initiatives.

During the same period in 2020, with the exception of Japan, all other top US trading partners saw their costs for US exports increase as shown in the following table:

Currency pair1 January 202018 March 2020Percentage change
USD/CAD1.30161.41008.3
USD/MXN18.906422.826620.7
USD/CNY6.96687.00480.4
USD/JPY108.6300106.9900-1.5
USD/GBP0.75830.82318.5
USD/EUR0.89150.90351.3
USD/KRW1,154.56001,240.10007.4
USD/NOK8.790610.357317.8
USD/BRL4.01635.006924.7
USD/TWD29.953130.21870.9
Source: OANDA

The shut downs around the globe due to the pandemic we believe may be the significant factor behind the changes in direction of these currency pairs.

18 March 2021 11:58 am EST

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: 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 and Foreign exchange …

Follow the links …

Central banks in emerging economies are set to move in different directions this year: Some remain in an easing mode and are expected to lower borrowing costs further, with Bloomberg Economics predicting cuts in China, Indonesia, India and Mexico. Emerging-Market Central Banks Are Set for a Hawkish Turn (msn.com)

Climate activists are warning that central banks are taking a “risky gamble” with their strategies for addressing the financial risks from global warming. Central Banks Criticized for Risky Gamble on Climate Fight (msn.com)

The truth about capital flows is worth revisiting and remembering as economists, media members and politicians continue to waste so much brain space and emotion on the doings of central banks. They’re mistaken. Central banks quite simply do not matter. Jack Ma’s Ant Group Further Exposes The Fed And Central Banks As Afterthoughts (forbes.com)

India’s foreign exchange reserves declined by $6.240 billion during the week ended February 5. According to the Reserve Bank of India’s (RBI) weekly statistical supplement, the reserves decreased to $583.945 billion from $590.185 billion reported for the week ended January 29. India’s foreign exchange reserves plunges by over $6 bn (sify.com)

The amount of money repatriated by Filipinos abroad fell last year for the first time since 2001 as the pandemic upended the global job market. Philippine Remittances See First Drop Since 2001 (msn.com)

The safe-haven dollar started the week near two-week lows on Monday, as optimism about COVID-19 vaccine rollouts and a planned $1.9 trillion U.S. stimulus package drove up riskier currencies and stock markets across Europe and Asia. Dollar weakens as market optimism lifts riskier currencies | Reuters

Currency pairsExchange Rate as of 4:15 pm 8 February 2021(1) As of 9:30 am EST Exchange Rate as of 15 February 2021(2)(3)
AUD/USD0.7656 0.7782
USD/CAD1.2781 1.2658
USD/CNY6.4664 6.4542
EUR/USD1.2035 1.2123
USD/INR72.8500 72.6140
GBP/USD1.3714 1.3895
USD/JPY105.4400 105.3900
USD/MXN20.1300 19.9260
USD/DKK6.1785 6.1259
USD/NOK8.5428 8.4119
BTC/USD  45,583.4000
ETH/USD  1,743.7500
Sources: (1) Federal Reserve ; (2) Reuters-currency rates; (3) OANDA-crypto rates

15 February 2021

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)

Interbank market news scan as of 1:00 pm AST: Ahead of the Fed

The Board of Governors of the Federal Reserve is expected to release their federal funds target rate today at 2:15 pm. No deviation is expected from its earlier announced strategy to keep the financial system running over two percent inflation through 2023 in order to meet any shortfalls on the central bank’s journey to get the US on a consistent two percent path. No change in tactic or strategy.

Currency pairsExchange Rate Before EventEventPost EventExchange Rate Post Event
AUD/USD0.7666Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/CAD1.2774Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/CNY6.4822Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
EUR/USD1.2075Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/INR73.0065Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
GBP/USD1.3689Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/JPY104.0000Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/MXN20.1832Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/DKK6.1554Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
USD/NOK8.6452Federal Reserve announcementNo changes in Fed funds rate or discount rate expectedNo major movement due to Fed announcement expected
Sources: Federal Reserve, Reuters

In other news ….

China's yuan inched higher
against the dollar on Tuesday, underpinned by tighter cash
conditions in domestic money markets following a spike in
short-term borrowing costs. Yuan inches higher on tighter liquidity conditions | Reuters

Focus is zeroing in when various Libor rates will expire, something ICE Benchmark Administration Ltd. is expected to clarify in the weeks ahead. Pivotal dollar Libor rates will likely live on until mid-2023, yet other Libors around the world may well expire at year-end. Libor Marks ‘Important Day’ With Partial Fix for Derivative Risk - Bloomberg 

There are other crucial factors driving the price of copper higher — and grains, too — but China is a big one. China has been using its exceptionally strong currency, the yuan, to stockpile copper and grains. China is Using its Currency to Stockpile Copper and Grains | Nasdaq 


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….