Sterling
Dangerous to do Business
May 11, 2012
Risk aversion is back in vogue. One saw this in equities more quickly than in foreign exchange. Investors can think of many reasons to be averse. The May 6th elections in Europe improved the probability of Greece leaving the common currency bloc in 2012. Four years and 10 months after the onset of the global [...] More
Currency World at First Quarter-end 2012
March 30, 2012
From a government perspective, chronic currency appreciation is undesirable. In the quarter now ending, officials in Japan, China, and Switzerland did their utmost to keep a lid on the yen, yuan, and franc. A drop in the yen of more than 6% against the dollar helped lift Japan’s Nikkei-225 by 19.3% in the quarter, some [...] More
In Search of New Foreign Exchange Equilibriums
March 23, 2012
Whether the euro looks resilient or weak depends on what comparisons to historical levels are chosen. Intuitively one expects this besieged money to be on the defensive. The Euroland economy is experiencing a recession. The debt crisis is at best in remission as attested by painfully high bond yield spreads with Germany. The Greek problem [...] More
Significant and Two-Sided Currency Market Risk
January 27, 2012
Since the start of the financial crisis in 2007, analysts have hedged forecasts of growth and inflation with the caveat that extraordinarily high uncertainty creates the potential for outcomes both well above or well below baseline predicted paths. An analogous truth should hold for key currency pairs over the next month or two. Investors late [...] More
Euroland Needs Further Euro Depreciation
January 13, 2012
The euro area is in a recession that European Central Bank officials think and hope will prove much milder than the last one. However, growth risks are skewed substantially to the downside, and all other parts of the world are enjoying positive growth. It is natural in light of this contrast for the euro to [...] More
T Minus Seven Days and Counting
December 2, 2011
The euro’s survival will top the agenda at the December 9 summit of EU leaders, but opinions vary widely on the terms and last possible timing for meeting that goal. Investor want a quick resolution, and their patience is running thin. Europe’s sovereign debt crisis has festered for two years, far too long already, and [...] More
November in Figures
November 30, 2011
November had uncanny parallels to October. Most of October had seen a rise in risk appetite and associated weakness in the dollar and strength in equities, and in most of November just the opposite had occurred. Former Greek Prime Minister Papandreou’s proposal to submit the October 26 EU rescue package to a referendum caused that [...] More
Thanksgiving Week 2011
November 18, 2011
Currency markets next week will be contending with the still unfolding euro debt crisis as well as the peculiarities of the U.S. Thanksgiving Holiday closure. During Europe’s crisis, which began its third year this month, conventional wisdom has felt that currency movement was only weakly related to national economic fundamentals and instead dominated by frequent [...] More
Currencies Dancing to the Beat of News Headlines
November 11, 2011
Intra-day volatility continues to dwarf any sense of purposeful direction in the arena of foreign exchange. News headlines related to the euro debt crisis are producing wild swings in equities as well. The dollar at 16:00 GMT today was a mere 0.4% stronger against the euro than its closing value last week. It had fluctuated [...] More
Lessons from an Eventful Week
October 28, 2011
In the final week of October, Euroland leaders at least managed to agree on something, but the substance of the agreement left virtually all analysts still very concerned about the region. A significantly stronger U.S. growth rate in 3Q than the first half was meanwhile confirmed. Quantitative easing by the Bank of Japan was expanded, [...] More
