Foreign Exchange, Africa, Caribbean, United States, Great Britain
I haven’t done an interbank market news scan in some time. I have decided to focus the scan on the African Diaspora looking at the US dollar in terms of certain African and Caribbean nations. I expect this scan to expand in the future.
Interbank, Pakistan, rupee. “The rupee reached a new record low on Monday, selling at 182.19 against the dollar in the interbank market, as political uncertainty triggered by a no-confidence move against Prime Minister Imran Khan weighed on sentiment, dealers said.” See article here. Source: The International News.
Interbank, Nigeria, naira, Access Bank. Similarly, (Access Bank) states that operating expenses at bank-level was up marginally by 2% year on year, showcasing the effectiveness of cost-cutting measures whilst also noting that FX rates on the Interbank market continued upward trend by 6% year on year to stand at N424 per dollar mainly driven by rate adjustments and lean supply. See article here. Source: Nairametrics.
Interbank, Pakistan, rupee. “The buying rate of 1 SAR to PKR was Rs 48.050 and the selling rate of 1 SAR to PKR was Rs 48.850 in the interbank market on Mar 28, 2022.” See article here. Source: BOL News.
Interbank, LIBOR, SOFR. “With a war waging in Central Europe, inflation at 50-year highs and the U.S. central bank looking to raise interest rates multiple times this year, you’d think that the average mortgage banker already has a pretty full plate. But add to the list of woes the Fed’s abortive transition from Libor to the Secured Overnight Financing Rate or SOFR and you have a recipe for disaster later this year.” — Christopher Whalen. See article here. Source: National Mortgage News.
Interbank, Nigeria, open market operations, naira. “In pursuant of its pro economic growth monetary policy the Central Bank of Nigeria, CBN, increased its net liquidity injection into the interbank money market by 110 per cent to N770 billion in the first quarter of the year, Q1’22, from N367 billion in the fourth quarter of last year, Q4’21.” See article here. Source: Vanguard Nigeria.
Interbank, U.S., inflation, dollar. “Neuberger Berman expects extreme bond market volatility to stabilise and is counting on opportunities scooping up cheap high-yield and investment grade bonds in the telecom and energy sectors.” See article here. Source: Financial Review.
Interbank, U.S., budget, taxes. “Today, President Joe Biden released the FY2023 Budget to propose critical investments that will prioritize security at home and abroad, bolster the economy, promote health, tackle climate change, and further opportunity for all.” See article here. Source: U.S. Department of the Treasury.
Foreign exchange rates and dollar index as of 29 March 2022, 3:20 am GMT
Government’s role is to administer the trading post by managing the masses with a law-and-order scheme; broadcasting the value of its money through a regulated banking system; and expanding into and protecting new markets with its military and diplomatic corps. Government, specifically western government, operationalizes the tenets of western philosophy: that man is at war with himself and nature and to alleviate the uncertainty of extermination, man must divide up the world and seek the most yield from the resulting parts.
Humans have no other reason to engage each other but to extract value from one another. To garner the most yield from this engagement, the exchange, the trade, needs to be unencumbered by conflict. Where it is impossible to obtain the means for survival by staying in one’s lane and exchange is necessary, humans then put in place customs, practices, rules designed to reduce conflict.
Government promulgates the statutes, codes, and policies that manage the day-to-day mitigation of conflict. It stays “in the money” by optimally maintaining the physical and social infrastructure that facilitates and expands its tax base. It’s ability to effectively manage infrastructure and expand its tax base makes its money more attractive to traders.
Unfortunately, government has taken on a life of its own, going beyond its mandate to manage infrastructure and ensure law and order to regulating society on an increasingly micro level. More of its policy and legislative initiatives appear intended to replace private market judgment with its own government judgment. This imposition of government judgment on market judgment was not part of the original deal between traders, market makers, and government. The imposition has seeped into the act of establishing price, an act that is best left to markets.
Government now wants more than its cut in the form of taxes. It now wants to weaponize price discovery and price setting for the purpose of expanding its cut by garnering more votes from the electorate.
The merchant trader, to protect her lane, should inform herself daily on the political process and support efforts that push back on government efforts to intervene in her ability to set price and other terms and conditions within and via the markets.
For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at email@example.com.
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Disclaimer: The above is provided for informational purposes and should not be construed as financial or legal advice or as creating an agreement to provide financial or legal advice.
Interbank, Russia, roubles, oil. “The Russian rouble briefly leapt to a three-week high past 95 against the dollar on Wednesday in Moscow, before settling close to 100, after President Vladimir Putin said Russia would start selling its gas to “unfriendly countries” in roubles.” See article here. Source: Reuters
Interbank, foreign exchange, Brazil. “Despite its history of extremely rigid and bureaucratic exchange rules, Brazil will now evolve towards a scenario of free movement of capital and simpler and less bureaucratic operations.” See article here. Source: Lexology
Interbank, foreign exchange. “When the U.S. central bank starts raising interest rates, emerging markets often begin to submerge again: Their borrowing costs rise, their currencies fall and, to add insult to injury, slower U.S. growth dents demand for their products. Will this time be the same as the era of zero interest rates ends?” See article here. Source: The Wall Street Journal
Interbank, foreign exchange, India. “The rupee pared initial gains to settle 14 paise lower at 76.32 (provisional) against the US dollar on Wednesday due to month-end dollar demand from importers and rising crude prices amid geopolitical uncertainties.” See article here. Source: Economic Times
Interbank, Russia. “Russia’s main stock market will resume trading Thursday for the first time in four weeks, the Central Bank announced Wednesday.” See article here. Source: The Moscow Times
Interbank, Russia, ruble. The Bank of England said on Thursday it would cease publishing the rouble’s exchange rate against sterling and the U.S. dollar with immediate effect after the Russian currency slumped to a record low. See article here. Source: Reuters.
Interbank, Pakistan, rupee. “The Pakistani Rupee (PKR) continued to struggle against the US Dollar (USD) and posted losses in the interbank market today. It lost 21 paisas against the greenback after hitting an intra-day low of Rs. 177.7 against the USD during today’s open market session.” See article here.
Interbank, China. “The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, decreased 4.3 basis points to 2.112 percent Monday.” See article here. Source: China.org.cn
Interbank, Pakistan. “Pakistani rupee continued to rise against the US dollar in the inter-bank market on Monday due to positive sentiments generated by the release of a $1 billion tranche by the International Monetary Fund (IMF).” See article here. Source: GeoNews
Interbank, Bank of England, inflation. “Almost certainly, 2022 will also see the most above-target inflation numbers since that change. The Bank will be heavily criticised and proposals will be made for reform. What has gone wrong?” See article here. Source: The Critic
Foreign exchange, National Bank of Ukraine. “Last week the hryvnia exchange rate has somewhat stabilized amid a decrease in rising demand for currency and increase in supply of currency, the press service of the National Bank of Ukraine (NBU) wrote on Facebook.” See article here. Source: Ukrinform
Interbank, Bank for International Settlements. Eddie Yue makes argument for closing the trade finance gap with better connectivity between digital finance platforms. Source: Bank for International Settlements. https://www.bis.org/review/r220126a.htm
The European Central Bank today released its update on economic, financial, and monetary developments. The ECB sees growth moderating into 2022 primarily due to supply bottlenecks. Global supplier delivery times remain high as food and energy upward price pressure remains in place. These pressures reflect a rebound from the low-price environment spawned by the pandemic.
While the ECB credits higher vaccination rates for the support of increased consumer spending, higher energy prices may be offsetting the increase in spending. Shortages of materials, equipment, and labor is holding back manufacturing. And on the labor front, the number of people in the workforce and hours worked still remain under pre-pandemic levels.
My Morning Takeaway: The trader should seek out best information sources on the future …
The Bloomberg article I note above has me thinking about how currency trade will look in the near future. I am not surprised about the discussions being held regarding how a central bank digital currency will be distributed globally. If efficiencies are created by a network of central bank digital currencies, especially where banks can save on settlement costs, then the trader, in my opinion, should get as much insight into the degree of volatility spawned by an increasingly efficient network.
If we assume efficiency involves an increase in data that can be analyzed at a faster rate, then a broker should be able to convey this information to a trader using her broker network. Again, the ability of a broker to provide this type of information thus giving the trader insights on how volatility may impact price movements will prove invaluable to both the trader and broker.
Another side-note thought on the future: the role of the bank in a central bank digital currency future. I don’t see the banks being cut out of the payment system per se. The banks’ strategic and tactical position in the payments system makes them too valuable for central banks to kick to the curb. Credit creates money and the banks will continue their role as the retail distributors of the currency whether that currency is a central bank distributed coin or not.