The strategic message behind US-Caribbean relations: Russia and China should not be invited to the Caribbean …

On 29 April 2022, Kamala Harris met with a number of political leaders to discuss the furtherance of relations between the United States and the Caribbean.  Topics in the closed-door meeting supposedly ranged from immigration, trade, and climate change.  The discussion reportedly leads up to next month’s Summit of the Americas, a meeting of Caribbean and Latin American leaders with the reported purpose of addressing economic, political, and these days, climate challenges impacting the region.

I note here that former U.S. senator Christopher Dodd met with the leaders of CARICOM member states reportedly on the issues of climate change, energy security, and disaster preparedness.    

From a narrative perspective, given the economic leverage the United States has in the western hemisphere, last week’s meetings and next month’s forum is about getting the rest of the region “on code” as to the wants and needs of the United States. 

Given the American perception that an emerging People’s Republic of China and an ever-pesky Russian Federation pose economic and political threats to the United States, the United States has to craft and transmit a narrative that the Caribbean can itself adapt and spread among its constituents.   

The most recent example of Chinese threats to United States’ hegemony in the Caribbean region is the new republic of Barbados’ willingness to establish a relationship with China as indicated by Barbados membership in China’s Belt and Road Initiative. 

Barbados recently became a republic, ditching Queen Elizabeth II and installing its own elected president.  This change in the head of state comes with a declining level of United Kingdom investment in Barbados currently pegged at approximately USD 5 billion.

China’s investment in Barbados reportedly exceeds the U.K.’s amount although China has a way to catch up with U.S. investment in Barbados which stands around USD 45 billion.

U.S. concerns with Russia appear to be more along the lines of political and military threats than China’s economic threats.  The U.S. is concerned that Russia is leveraging security deals with Cuba, Nicaragua, and Venezuela in order to straighten its posture in America’s backyard.

Politically, Russia’s support of authoritarian-populist regimes in Latin America poses a challenge to the U.S. political philosophy of democratic elections and private ownership of capital.

I am not privy to what Ms Harris shared with Caribbean leaders in their closed-door session.  I don’t think that Caribbean leaders took Ms Harris’ opening remarks as a pledge of altruism.  Like any holder of monopoly power, where there is a threat of entry, the monopolist offers special services or discounts in order to keep customers loyal while taking steps to kick new entrants out of the market.

If Ms Harris made this kind of appeal behind closed doors, then her strategic messaging was on point.  The goal of strategic messaging is to maintain optimal political positioning.  Optimal political positioning for the United States means maximizing sought after benefits such as a minimally challenged trade position in the Caribbean region and securing firmer support for Ukraine as that country attempts to repel an invasion from Russia. 

The Caribbean reaction from has been mixed,  While the majority of Latin American and Caribbean countries opposed Russia’s invasion, most have been ambivalent about imposing sanctions even though their trade with Russia is overall minimal.

Alton Drew

1 May 2022

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Foreign exchange rates as of 12:13 am AST. United States, Great Britain, Canada, China, Angola, Nigeria, Japan

Currency Pair21 March 202222 March 202223 March 202224 March 202225 March 2022
EUR/USD1.104981.103681.100931.100881.09905
GBP/USD1.317481.316321.320521.323061.31868
USD/CNY6.359056.355546.362586.368546.36767
USD/CHF0.931750.93220.934120.933030.93138
USD/NGN415.42415.043415.732415.115414.015
USD/ZAR14.940114.938814.874714.779514.6555
USD/AOA449.794449.794449.438448.867449.194
USD/INR75.66375.968575.975976.123876.1478
USD/JPY119.145119.274120.537121.022121.77
USD/SAR3.745243.745243.745243.745243.74524
Dollar Index98.4998.4698.7898.8498.52
Sources: OANDA, MarketWatch

Will isolationism force the U.S. government’s currency to compete with other domestic currencies?

Over the past month, Americans have been moving their attention from the pandemic to the war in eastern Europe.  Not fully appreciated by an American public glued to the media scenes of evacuees, missile fire, and troop advancements is the closer economic alliance of China and Russia.  United States government officials have been prognosticating with unfounded confidence that economic sanctions against Russia in addition to stiff resistance from Ukraine’s military will thwart Vladimir Putin’s plans to pull more of Ukraine into the Russian orbit.

What I am seeing is a greater incentive by Russia, China, and other nations to go their own way by expanding alternative payment systems that move capital that underlies trade between Europe and Asia.  Speculation has increased that sometime in the future, the world may go from pricing oil in dollars to pricing oil in yuan.  With Russia being amongst the world’s top producers of oil, accepting yuan as payment for oil would put Europe in a pickle: dumping the long established petro-dollar for yuan.

As the United States continues to lead from behind on the eastern European portion of the world stage, I don’t hear many Americans contemplating what a new world order would look like where the United States issues a currency that finds itself limited to buying Caribbean vacations.

One currency scenario in a post petro-dollar world could see the greenback sharing legal tender status with alternative currencies.  These currencies could be digital, virtual, or actual (paper & coin).  The issuers, from 30,000 feet down, look like competitors, with potentially hundreds of communities issuing, circulating, and using their own currencies.  Right now, I would classify the issuers in this post petro-dollar world into three main entities.

The first entity is the public corporate body or government.  The government issues a currency in exchange for tax receipts.  The public corporate body’s currency is created by its ability to coerce, by law and force, individuals to pay a tax in exchange for protection of property and person.

The second entity is the private corporate body or corporation.  The corporation issues currency to consumers in exchange for revenues.  The private corporate body’s currency is created by its ability to provide the consumer with goods and services that consumers are willing to exchange their work energy for.  The private corporate body’s currency is backed by goods and services.  The greater the quality of these goods and services, the higher the demand for their attached currency.

Last is the private bank.  The private bank’s currency is created by its ability to store and secure its customer’s commodity wealth.  The currency the private bank issues, the tradeable receipt, allows the bearer of the currency to redeem her tradeable receipt in the form of a commodity.  The currency is commodity-backed.

An isolated U.S. government means that the currency it issues will incur reduced demand and a lowered value.  Domestically, the government issued currency will purchase fewer goods as competing imports diminish in availability.  The currencies of private corporations that provide valuable goods and services and private banks may see an increase in their value.  The taxpaying consumer will want to make a switch.

Under this scenario, government, if it is to survive, may have no choice but to enter agreements with private banks and private corporations to set a domestic exchange rate which in turn allows government to collect taxes via the use of alternative currencies.

The war in eastern Europe may set in motion events leading to competing currencies in America. 

Alton Drew

21.03.2022

For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at altondrew@altondrew.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 Market News Scan: Russian central bank ability to sell roubles Monday implies an unknown market participant; claims internal substitute for SWIFT.

Interbank, Russian, ruble, central bank. “Russia’s central bank more than doubled its key policy rate on Monday and introduced some capital controls as the country faced deepening economic isolation, but its governor said sanctions had stopped it selling foreign currency to prop up the rouble.” See article here. Source: US News and World Report.

Interbank, Russia, rouble. “Russia’s rouble tumbled to trade above 100 a dollar on Monday, as investors fretted about the fallout from biting Western sanctions against the country, but a slew of central bank measures including a large rate hike helped it off record lows.” See article here. Source: Nasdaq.

Interbank, Russia, oil markets. “The heavy new round of sanctions on Russia by the U.S. and its allies are likely to push oil prices — and inflation — even higher.” See article here. Source: CNBC.

Interbank, banks, liquidity. “Banks are an essential part of the financial eco-system. Their collapse can have a cascading effect on the rest of the economy.” See article here. Source: Capital.com.

Interbank, China, overnight rate. “The overnight Shanghai Interbank Offered Rate (Shibor), which measures the borrowing cost of China’s interbank market, edged up 0.3 basis points to 2.234 percent Monday.” See article here. Source: China.org.cn.

Interbank, Pakistan. “The Interbank US dollar (USD) against Pakistani rupee (PKR) Closing exchange rate is Rs175.25 at 8:30 am PST on March 1st, 2022.” See article here. Source: BOL News.

Foreign exchange rates as of 8:54 am AST

EUR/USD=1.11917

GBP/USD=1.33881

USD/CAD=1.27352

USD/MXN=20.5102

USD/JPY=115.336

USD/NGN=415.632

USD/INR=75.3584

USD/CNY=6.3095

Source: OANDA

Dollar Index=97.01

Source: MarketWatch

For consultation on how this political or legal event impacts your foreign exchange trade, request an appointment at altondrew@gmail.com.

Call to action: To support this page, please visit our advertisers. You may also visit the sidebar and make a donation via PayPal.

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 Market News Scan: U.S., Europe take action against Russian banks.

Interbank, Russia, SWIFT. The United States, Europe, and Canada take action to remove certain Russian banks from the Society for Worldwide Interbank Financial Telecommunication. See article here. Source: CNBC

Interbank, China, foreign exchange market. China’s foreign exchange (forex) market recorded transactions of 19.45 trillion yuan ($3.08 trillion) in January, official data showed on Friday. See article here. Source: Ecns.cn

Interbank, Nigeria, foreign exchange market. The value of the Naira to the Dollar at the Peer-2-Peer (P2P) segment of the foreign exchange (forex) market on Friday went down by N2 to close the day at N575/$1 as against N573/$1 it traded on Thursday. See article here. Source: BusinessPost

Foreign exchange rates of interest in Asia as of 11:04 AST:

USD/JPY=115.521

AUD/USD=0.7225

NZD/USD=0.67419

USD/CNY=6.3161

Source: OANDA

Interbank Market News Scan: PBOC announces loan prime rate …

Central Bank of the People’s Republic of China

Under the authorization of the People’s Bank of China (PBC), the National Interbank Funding Center (NIFC) announced the Loan Prime Rate (LPR) on February 21, 2022 as follows: the one-year LPR is 3.7% and the above-five-year LPR is 4.6%. The rates are effective until the next release. See article here. Source: The People’s Bank of China.

In order to keep the liquidity of the banking system adequate at a reasonable level, the People’s Bank of China conducted reverse repo operations in the amount of RMB10 billion through interest rate bidding on February 21, 2022. The reverse repo operations have a maturity of seven days at 2.10%. See article here. Source: The People’s Bank of China.

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. See article here. Source: China.org.cn

Monetary Authority of Singapore

The Monetary Authority of Singapore (MAS) announced (last Friday) that it will further extend the MAS SGD Facility for ESG Loans [1]  (the Facility). This extension will complement the six-month extension of Enterprise Singapore’s (ESG) Temporary Bridging Loan Programme  [2]  (TBLP) from 1 April 2022 to 30 September 2022. 

2   The Facility will continue to provide Singapore Dollar (SGD) funding to eligible financial institutions [3] (EFIs) for a two year tenor. A revised interest rate of 0.5% per annum [4] will apply for funding provided from the May 2022 application window onwards, to better reflect interest rates in Singapore, which have risen alongside the economic recovery. 

3   Since its introduction in April 2020, the Facility has disbursed a total of S$14.2 billion to EFIs in support of their lending to companies under the ESG Loan Schemes. Collectively, the Government’s risk sharing through the ESG Loan Schemes and MAS’ lower-cost funding through the Facility will continue to keep borrowing costs low for local enterprises to support their cashflow needs.

  1. [1] The Facility was established on 20 April 2020. The Facility was extended twice on 12 October 2020 and 5 July 2021, to complement ESG’s two extensions of the TBLP, the latest of which was from 1 October 2021 to 31 March 2022.
  1. [2] The TBLP was introduced in March 2020 for a year to help companies access working capital for their business needs during the COVID-19 crisis. The TBLP was extended twice on 12 October 2020 , and 5 July 2021 , the latest of which was from 1 October 2021 to 31 March 2022. On 18 February 2022, ESG has announced a further extension to 30 September 2022.
  1. [3] Banks and finance companies participating in the ESG Loan Schemes, which refer to the TBLP and the Enterprise Financing Scheme – SME Working Capital Loan, are eligible to tap on the Facility.
  1. [4] Since April 2020, the interest rate was 0.1% per annum for a two-year tenor to EFIs. Funding provided to EFIs in the February, March and April 2022 application windows will continue to be at the interest rate of 0.1% per annum for a two-year tenor.

Source: Monetary Authority of Singapore

Interbank Market News Scan: Remittances to Pakistan decline; Chinese bonds offering safe haven for investors concerned about volatility …

Interbank, Ghana, cedi. “Uncertainties surrounding the country’s ongoing access to forex are causing speculations on the FX market which has effectively driven the spread between cedi depreciation on the interbank and the retail markets.” See article here. Source: GhanaWeb

Interbank, China, yuan. “Holdings of Chinese government bonds by offshore investors rose in January despite a steep drop in yield premiums over U.S. government debt, as investors continued to seek safe havens from inflation and rising rates afflicting other markets.” See article here. Source: Nasdaq

Interbank, Pakistan, rupee. “Rupee slipped 0.13 percent (-23 paisa) against the US dollar last week despite recent inflows from the International Monetary Fund.” See article here. Source: Daily Times

Interbank, China, bonds. “China’s interbank treasury bond index in net price opened at 996.19 points Monday, lower than the previous close of 997.24 points, according to the China Foreign Exchange Trade System.” See article here. Source: China.org.cn

Foreign exchange rates and dollar index as of 5:20 am EDT

EUR/USD=1.13456

GBP/USD=1.35484

USD/MXN=20.5234

USD/GTQ=7.51781

USD/NGN=416.51

USD/GHS=6.32313

USD/VND=22,686.8

USD/JPY=115.451

USD/KRW=1,199.56

USD/INR=75.412

USD/BTC=0.00002

USD/ETH=0.00034

Source: OANDA

Dollar Index=96.29

Source: MarketWatch

Interbank Market News Scan: China’s overnight bank rate decreases; Ukraine’s hryvnia shows strength; Bitcoin strengthens.

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

Foreign exchange rates of interest …

EUR/USD=1.1451

GBP/USD=1.3527

USD/MXN=20.667

USD/GTQ=7.5163

USD/NGN=415.7

USD/GHS=6.3313

USD/VND=22,646.8

USD/JPY=115.191

USD/INR=74.497

USD/BTC=0.00002

USD/ETH=0.00034

Source: OANDA

DXY=95.58 Source: MarketWatch

Interbank Market News Scan: China tightens regulations on foreign exchange market….

5 September 2021

Interbank. Chinese officials to tighten foreign exchange market supervision. https://www.forexlive.com/centralbank/!/chinese-officials-to-tighten-foreign-exchange-market-supervision-20210905

Interbank. Nigeria. Naira. Former Deputy Governor of Central Bank of Nigeria(CBN), Dr Obadaiah Melafia weekend attributed the dip of the naira in the foreign exchange market to the bad policies of President Muhammadu Buhari’s administration and the tensions across the country. “Nigeria is a failed state.” https://www.vanguardngr.com/2021/09/dip-of-naira-in-foreign-exchange-market-due-to-buharis-bad-policies-mailafia-alleges/

Interbank. Forex. So what fundamentals are impacting the foreign exchange markets? https://finance.yahoo.com/news/introduction-major-fundamental-influences-forex-080046373.html

Interbank. India. India’s management of foreign exchange reserves results in supporting 18 months of imports. https://www.deccanherald.com/opinion/panorama/management-of-foreign-exchange-reserves-1026066.html

Interbank. Russia. Russia’s central bank provides alternative economic forecast for the next 18 months; one of a severe down-turn vs. moderate inflation. https://www.themoscowtimes.com/2021/09/03/world-economy-could-face-2008-meltdown-russias-central-bank-warns-a74962

Interbank. Brazil. Digital real. The Central Bank of Brazil is still studying the creation of a Digital Real, according to statements given by Fabio Araujo, a representative of the institution. https://news.bitcoin.com/central-bank-of-brazil-researches-creation-of-digital-real/

Interbank. Dollar Index. As of 10:33 pm EST, the Yahoo Market Watch Dollar Index was at 92.16. https://www.marketwatch.com/investing/index/dxy/charts?mod=mw_quote_tab

Central bank decisions as of 5 September 2021, 11:25 pm EST

AUD/USD 0.7437

As of 11:01 pm EST, no Reserve Bank of Australia decisions impacting rates.

NZD/USD 0.7137

As of 11:13 pm EST, no Reserve Bank of New Zealand decisions impacting rates.

USD/JPY 109.8100

As of 11:20 pm EST, no Bank of Japan decisions impacting rates.

USD/CNY

As of 11:24 pm EST, no People’s Bank of China decisions impacting rates.

For a consultation on any regulatory or legislative discussions or announcements, please reach out to us at altondrew@altondrew.com for information on consultation rates and to reserve an appointment.

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Alton Drew