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 news scan: Latest global central bank and foreign exchange news …

The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, increased 6.3 basis points to 1.738 percent Friday. Source: Xinhuanet

Some of the world’s biggest banks are urging a US judge not to immediately terminate the London Interbank Offered Rate (Libor) after a group of borrowers filed suit claiming the benchmark was the work of a “price-fixing cartel.” Source: BusinessWorld

How do you wean everyone from asset managers and traders to corporate treasurers off derivatives that are so ubiquitous, they’ve become part of the fabric of the financial system? Source: Bloomberg

Data from the Central Bank of Kenya (CBK) covering the lead up to Friday showed that daily interbank rate was on a rising trend, sending the average near the 6.29 per cent that was last seen in April 2020. Source: Business Daily

On January 15th, the midpoint of RMB exchange rate in the interbank foreign exchange market is: 1 US dollar to RMB 6.4633, 1 euro to RMB 7.8549, and 100 yen to RMB 6.2263. Source: SMM News

My takeaway of Brainard speech: Fed maintaining steady course. No impact on the interbank markets.

Lael Brainard, a member of the Board of Governors of the Federal Reserve System, recently delivered a speech discussing the Federal Reserve’s policy for achieving a two percent inflation goal. She reiterated the Federal Reserve’s FAIT policy, a strategy that uses a flexible average inflation targeting strategy for achieving two percent inflation. The aim, according to Governor Brainard, is to keep inflation moderately above two percent for some time, allowing the economy to make up for any short falls along the way due to running below the two percent goal.

Governor Brainard would like to see the Federal Reserve focus on achieving full employment particularly for low and moderate income U.S. households. Price inflation has not been as responsive to labor market tightness as it has in the past, The Federal Reserve aims to eliminate shortfalls to maximum employment of human capital.

I didn’t hear anything in Governor Brainard’s comments that would have a direct impact on the interbank markets, whether for foreign exchange or for overnight loans.