Interbank market news scan as of 11:30 am AST: Central Banks, Foreign Exchange; US economy expands in last quarter of 2020

Currency pairsExchange Rate Before Event 11:07am ASTEventPost EventExchange Rate Post Event
AUD/USD0.7681GDP release0.7602USD strengthening
USD/CAD1.2774GDP release1.2829USD strengthening
USD/CNY6.4822GDP release6.4603USD weakening
EUR/USD1.2118GDP release1.2129USD weakening
USD/INR73.0500GDP release72.9664USD weakening
GBP/USD1.3715GDP release1.3700USD strengthening
USD/JPY104.0600GDP release104.4100USD strengthening
USD/MXN20.7000GDP release20.3430USD weakening
USD/DKK6.1554GDP release6.1312USD weakening
USD/NOK8.6242GDP release8.6860USD strengthening
Sources: Federal Reserve, Reuters

 The U.S. Bureau of Economic Analysis today reported the following:

“Real gross domestic product (GDP) increased at an annual rate of 4.0 percent in the fourth quarter of 2020, reflecting both the continued economic recovery from the sharp declines earlier in the year and the ongoing impact of the COVID-19 pandemic, including new restrictions and closures that took effect in some areas of the United States. In the third quarter, real GDP increased 33.4 percent.”

The takeaway …

I can’t say with any certainty that today’s report has a direct effect on foreign exchange rates.  The US dollar has been weakening for some time and weakness is expected throughout the rest of the year.  Given yesterday’s announcement by Federal Reserve chairman Jerome Powell that the fed funds target rate would remain the same (0-.25%) and that running the inflation rate above two percent would continue, the lack of change in dollar weakness is no surprise.

Traders should expect the Biden administration will maintain a strategy that has addressing Covid-19 at its core.  Deviation from this policy path should inform traders that not only is spread of and infection by the virus under control but the U.S. political economy is moving back to pre-pandemic activity.

In other news …  

China’s interbank treasury bond index in net price opened at 979.94 points Thursday, lower from the previous close of 980.43 points, according to the China Foreign Exchange Trade System. China’s interbank treasury bond index opens lower Thursday – Xinhua | (

The Nigerian government has become dependent on central-bank borrowing and will struggle to wean itself off the copious money printing that has raised concerns about the health of Africa’s largest economy, according to market observers. Nigeria’s Addiction to Central Bank Money Seen Hard to Cure – Bloomberg

Central banks representing one-fifth of the world’s population are likely to issue their own digital currencies in the next three years, a survey by central bank umbrella group the Bank for International Settlements shows. Central bank digital cash could come to 20% of the world in three years – BIS | Reuters

Yemen’s central bank dismissed United Nations allegations that the Yemeni government misused millions of dollars from Saudi Arabia to buy essential commodities for the Yemeni people. Yemen’s central bank dismisses UN corruption allegations (

The European Central Bank’s views on the euro this week amount to a declaration of “currency war,” according to research from one of Germany’s biggest banks. ECB In ‘Currency War’ Over Euro, Commerzbank Strategist Says – Bloomberg

Interbank market news scan as of 12:42 am AST: #centralbanks, #financeministries

ICICI Bank on Thursday said it has executed its first interbank-money market transaction linked with Secured Overnight Funding Rate (SOFR) through its Hong Kong branch. This transaction is part of the bank’s Benchmark Transition Management plan to assess the preparedness towards a smooth transition to the new Alternative Reference Rates (ARRs), the Bank said in a statement. ICICI bank makes its first interbank-money market transaction linked with SOFR – The Hindu BusinessLine

A battle between one of Mexico’s richest men and one of its most respected institutions appears to have ended in a victory for the central bank. Billionaire Loses to Mexico Central Bank in Battle Over Cash (

The Bank of Japan and the European Central Bank both had monetary policy meetings, but as widely anticipated, left their current policies unchanged, while pledging to continue supporting economies through the pandemic. The announcements have no impact on currencies, with financial markets trading on sentiment.

Both the Bank of Canada and European Central Bank met in recent days, setting the tone for 2021: more easing is possible, but might not be needed.

The Bank of International Settlements has outlined plans to embark on a variety of CBDC trials worldwide this year.

As of 11:30 am AST 10 December 2020, Foreign exchange rates between U.S., select countries in East Africa, West Africa, the Caribbean, and Asia, and BitCoin

As of  11:30 am AST, 10 December 2020:

How to read the chart:

CAD/USD: If you come to the United States with one Canadian dollar (CAD)and wish to sell it for a US dollar (USD), the market price is .78103 USD.

USD/CAD: If you take a US dollar (USD) to Canada and wish to sell it for a Canadian dollar (CAD), the market price is 1.28018 CAD

CAD/USD=0.78103   USD/CAD=1.28018

CNH/USD= 0.15339   USD/CNH=6.51820

EUR/USD= 1.21037   USD/EUR=0.82610

DKK/USD =0.16260   USD/DKK=6.14831

NGN/USD= 0.00260   USD/NGN=379.384

JPY/USD=0.00960   USD/JPY=104.19

INR/USD=0.01356      USD/INR=73.5975

JMD/USD=0.00683    USD/JMD=143.446

GYD/USD=0.00469       USD/GYD= 205.184

GHS/USD=0.17031     USD/GHS= 5.84142

XCD/USD=0.37037        USD/XCD= 2.70

KES/USD = 0.00889     USD/KES= 110.408

BBD/USD = 0.50000     USD/BBD = 2.0000

TTD/USD = .14459         USD/TTD= 6.66797

BTC/USD= 18252.40     USD/BTC= 0.00005

Source: OANDA

Major political/legal event impacting foreign exchange

BIS releases Basel III monitoring results on banks

Today, the Bank of International Settlements Basel III committee released results of its survey determining compliance with bank capital requirements developed in 2010 under the Basel III framework.  The framework was developed in response to the financial crisis of 2008.  The objective of Basel III was to modify bank capital requirements thus leading to less variability in a bank’s risk weighted assets.

The survey announced today found that banks were continuing to make progress toward meeting the Basel III requirements and that bank liquidity ratios pre-Covid have been improving.  

Source: Bank of International Settlements

As of 11:23 am AST 27 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

As of 11:23 am AST 27 November 2020, U.S. Treasury rates and Federal Funds rates are as follows:

3-month: .08%

6-month: .09%

12-month: .10%

2-year: .15%

10-year: .85%

30-year: 1.58%

Fed Funds Rate: 0.08%

Federal Reserve Target: 0.25%

Prime Rate: 3.25%

Source: Bloomberg

Major political/legal events impacting currencies

Basel Committee amends capital requirements for non-performing loan securitisations

The Basel Committee on Banking Supervision yesterday published the technical amendment Capital treatment of securitisations of non-performing loans. The rule, which the Committee started developing before the onset of the Covid-19 pandemic, closes a gap in the Basel framework by setting out prudent and risk sensitive capital requirements for non-performing loan securitisations.

The Committee consulted publicly on the technical amendment in June 2020. In contrast to the consultative proposal, the final rule permits banks to apply the external ratings-based approach to non-performing loans securitisation exposures, without the 100% risk weight floor. In addition, the final rule include discounts on tranche sales in the definition of discount incurred by the originating bank that factors in the capital requirements.

Committee jurisdictions agreed to implement the technical amendment by no later than January 2023. The Committee would like to thank all those who contributed time and effort to express their views during the consultation process.

Source: Bank of International Settlements

Foreign exchange execution algorithms. Bringing efficiency but at what price?

Source: Bank of International Settlements

  • Execution algorithms (EAs) – designed to buy or sell foreign exchange according to a set of user instructions – have contributed positively to FX market functioning.
  • As EAs change the way market participants access the FX market and how trades are executed, they also give rise to new challenges.
  • Central banks and market participants must have access to the necessary data, skills and tools to allow them to assess the opportunities and risks of evolving markets.

Execution algorithms – designed to buy or sell a predefined amount of foreign exchange according to a set of user instructions – have seen a rise in usage amid an increasingly decentralised and fragmented trading environment according to a report published today by the BIS Markets Committee.

This has helped support price discovery and market functioning but also has the potential to create new risks, said the report, FX execution algorithms and market functioning.

The report examines the drivers and implications of the increase in EA usage in FX markets. It draws on a unique survey of 70 sophisticated market participants globally and extensive industry-wide outreach, and provides distinctive perspectives on the use of EAs, including by central banks.

Prepared by a study group led by Andréa M Maechler, Member of the Governing Board of the Swiss National Bank, it concludes that while EAs improve market functioning, they also create new challenges. In particular, they transfer execution risk from dealers to end users; contribute to changing liquidity dynamics and the underlying market structure; and raise the bar for market participants in accessing the data, skills and tools required to navigate this market successfully.

“The report provides an insightful stocktake of the growing use of FX execution algorithms by a broad range of participants in FX markets, and highlights both the benefits and the potential risks of such execution algorithms. This will help market participants gain a deeper understanding of such elements, which are becoming increasingly important in FX markets,” said Jacqueline Loh, Deputy Managing Director, Monetary Authority of Singapore, and Chair of the Markets Committee.

EAs may also create self-reinforcing loops and exacerbate sharp price moves, although initial observations from the Covid-19 pandemic suggest that these risks may be less acute than expected. Still, further research is needed.

“While the focus of the report is on the FX market, many of the findings are also of broader relevance to other fast-paced electronic markets experiencing similar trends. As those markets continue to evolve rapidly, access to high-quality data, novel skills and adequate tools becomes key in this context,” said Ms Maechler.

These issues require broad-based collaboration between the official and the private sectors. The Global Foreign Exchange Committee (GFXC) has already established workstreams on algorithmic trading and disclosures to examine them in detail.