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Tag Archives: Currency War

Transition to Cashless Society Could Lead to Financial Exclusion and System Vulnerability, Study Warns

“Serious risks of sleepwalking into a cashless society before we’re ready – not just to individuals, but to society.” By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Ten years ago, six out of every ten transactions in the UK were done in cash. Now it’s just three in ten. And in fifteen years’ time, it could be as low as one in ten, reports the final edition of the Access to Cash Review. Commissioned as a response to the rapid decline in cash use in the UK and funded by...

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US Dollar Status as Global Reserve Currency?

So, how hot is the Chinese Renminbi? And is the euro dead yet? The US dollar’s role as global reserve currency is defined by the amounts of US dollar-denominated assets – US Treasury securities, corporate bonds, etc. – that central banks other than the Fed are holding in their foreign exchange reserves. To diminish the dollar’s role as a global reserve currency, these central banks would have to dump the dollar. So, let’s see. Total global foreign exchange reserves, in all currencies,...

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Backlash Against War on Cash Reaches the Bank of Canada

A cashless society could have “adverse collective outcomes.” By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. In recent months, a slew of political and financial institutions have raised concerns about the march toward a cashless economy. They include: The ECB warned that a phase-out of cash could pose a serious risk to the financial system. Depending too heavily on electronic payment systems could expose financial systems to catastrophic failures in the event of power...

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US Dollar & Emerging Market Stocks: Big-Fat Gains Turn to Big-Fat Losses

“The tide is going out and investors are starting to worry about which EM economies have been swimming naked.” It was a nice risk-on party, but now is hangover time. Emerging Markets stocks, after some rough spots in 2015, had a great 2016 and an even better 2017. Last year, the MSCI Emerging Markets index soared 34%, outperforming even the S&P 500, which also had a great year, surging 18%. The Emerging Markets stock surge was powered by hot money from the Developed Markets, as the...

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US Dollar Refuses to Die as Global Reserve Currency — But Loses Ground

Chinese RMB gains, but is inconsequential as central banks remain leery. Euro hangs on. Those who’re eagerly awaiting the end of the “dollar hegemony,” or the end of the dollar as the top global reserve currency, well, they’ll need some patience, because it’s happening at a glacial pace – according to the IMF’s just released data on the “Currency Composition of Official Foreign Exchange Reserves” (COFER) for the second quarter 2018. What it confirms: Global central banks are ever so...

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Turkey’s Debt & Currency Crisis Morphs into Financial Crisis as Banks Face Funding Squeeze

“Substantial Increase in the Risk of a Downside Scenario”: Moody’s By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. The risks are fast multiplying in Turkey’s beleaguered economy. In a clear sign of deterioration, Turkey’s economic confidence index plunged 9% month-on-month to 83.9 points in August, its lowest since March 2009. The country’s currency, the Lira, resumed its downward spiral. And Moody’s downgraded 20 financial institutions in Turkey. Moody’s cited a...

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What the Heck Just Happened in Argentina?

The price of cheap dollar-debt. Just when you think Argentina’s financial crisis can’t get worse, it gets a whole lot worse. In order to halt the peso from collapsing further, the IMF, after some serious begging from the government, had agreed to a $50-billion bailout package in June, to be disbursed in increments. In addition, the central bank raised its policy rate in big jumps, reaching 45% on August 13. And in an emergency meeting today, it goosed the rate to a blistering 60%!! And...

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“Asia Will Be the Next Source of Downside Systemic Risk for Financial Markets”

Emerging Markets turmoil: The price of cheap debt & misallocation of capital. “Excess liquidity usually leads to the misallocation of capital, masking any balance sheet constrains. As this tide of excess liquidity recedes, it reveals the misallocation of capital and the mispricing of risk,” Nedbank CIB strategists Neels Heyneke and Mehul Daya write in a note. And this is particularly the case for excess dollar-liquidity in the Emerging Markets (EMs). Sovereign credit ratings – such...

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Why Are ATMs Disappearing at an Alarming Rate after a Wave of Branch Closures?

Banks are curtailing “cash services.” But why? By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. In Australia, banks are reducing ATMs by about 8% a year. In the UK, ATMs — or cashpoint machines, as they’re termed locally — are disappearing at a rate of around 300 per month, leaving consumers in rural areas struggling to access cash, according to a new report by the consumers’ association, Which? The rate of closures has increased sixfold in the period from November 2017...

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Rise of US Dollar Haunts Emerging Market Debt

A vicious cycle, kicked off by cheap debt that’s suddenly not cheap, after 8 years of experimental monetary policies. The dollar has risen nearly 2% since Thursday last week. Since April 17, when this move started, the dollar has surged over 8%, based on the WSJ Dollar Index, which tracks the dollar against the currencies of 16 key trading partners, including Mexico and China. From its low on February 16, the dollar has now risen 9.3% to the highest level since May 10, 2017: The...

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