• Coaching For Boomers

    Coaching For

  • Increased Treasury issuance to fund US bailouts will test willingness of central banks and SWFs to continue financing US debt
  • Danske: Q208 COFER data reveals tentative signs of a slow movement away from the dollar (62% of reserves) and mainly into euro (27%)
  • SG: Diversification has been more intense in industrialized countries than in emerging markets. Although central banks adjust their reserves to FX fluctuations, they remain reluctant to diversify out of the dollar. USD will stay the main reserve currency unless dollar-pegged EM currencies suddenly plunge and China, GCC de-peg or revalue, speeding up reserve diversification
  • UniCredit: Dollar de-pegging by EMs, esp. middle east oil exporters, may send EUR/USD surging to $1.75-1.80
  • MS: More than 100% of the change in currency composition of reserves reported by end-2007 COFER can be explained by exchange rate changes. Central banks have been ‘buying low and selling high’ in order to preserve benchmark targets
  • Goldman Sachs (not online): Reserve accumulation runs at 4-9% q/q, suggesting an 8-18% range for quarterly EUR/$ moves. Growing overall FX reserves make it ever more difficult to see larger spot moves
  • SWFs may lower sov. demand for $ assets or shift $ asset classes
  • Eichengreen: $ likely to remain leading reserve currency
  • BBH: US dollar and yen rose by 6.7% and 12% respectively on a trade-weighted basis in October and 3-month implied euro volatility is at its highest level since the euro was introduced. G7 statement (verbal intervention), isolated interventions (as in Australia) and BoJ rate cut will substitute for coordinated intervention
  • Oct 27: RBA intervenes to support AUD/USD but isolated intervention is deemed to fail, with the post-intervention AUD rally only temporary
  • BNY: The safe haven status of the USD and JPY has caused both to become overbought amidst record volatility and escalating crisis conditions. European politicians have called for a “new Bretton Woods” agreement, a return to a pre-1995 world where central banks took a rather more activist stance in currency markets. The possibility of multilateral intervention would achieve its maximum impact if it were seen to be led by the US Treasury
  • SG: The slide in USD/JPY below 100 could be merely a staging post before a renewed JPY Endaka
  • Danske: As the financial crisis draws to an end, some yen support will wane. Looking at the sharp deterioration of the Japanese trade balance that historically has moved closely with USD/JPY, very little downside potential for the pair remains in the longer run - suggesting a USD/JPY move towards 130. Intervention more likely if USD/JPY breaks 95.90
  • BNP: G7 concern looks more to do with levels of exchange rates than volatility. Triggers may be at 1.60 for EUR/USD and 100 for USD/JPY. Sterilised intervention is largely ineffective unless it’s backed up with appropriate monetary policies
  • Mizuho: With tax revenue down & exports the only growth engine in Japan, intervention is just a matter of time
  • BBH: US dollar and yen rose by 6.7% and 12% respectively on a trade-weighted basis in October and 3-month implied euro volatility is at its highest level since the euro was introduced. G7 statement (verbal intervention), isolated interventions (as in Australia) and BoJ rate cut will substitute for coordinated intervention
  • Oct 27: RBA intervenes to support AUD/USD but isolated intervention is deemed to fail, with the post-intervention AUD rally only temporary
  • BNY: The safe haven status of the USD and JPY has caused both to become overbought amidst record volatility and escalating crisis conditions. European politicians have called for a “new Bretton Woods” agreement, a return to a pre-1995 world where central banks took a rather more activist stance in currency markets. The possibility of multilateral intervention would achieve its maximum impact if it were seen to be led by the US Treasury
  • SG: The slide in USD/JPY below 100 could be merely a staging post before a renewed JPY Endaka
  • Danske: As the financial crisis draws to an end, some yen support will wane. Looking at the sharp deterioration of the Japanese trade balance that historically has moved closely with USD/JPY, very little downside potential for the pair remains in the longer run - suggesting a USD/JPY move towards 130. Intervention more likely if USD/JPY breaks 95.90
  • BNP: G7 concern looks more to do with levels of exchange rates than volatility. Triggers may be at 1.60 for EUR/USD and 100 for USD/JPY. Sterilised intervention is largely ineffective unless it’s backed up with appropriate monetary policies
  • Mizuho: With tax revenue down & exports the only growth engine in Japan, intervention is just a matter of time