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Tag Archives: Currency War

As Erdogan Cements His Hold Over Turkey’s Economy, Global Investors Begin to Panic

His Toxic Mix: destruction of the lira and a mountain of foreign-currency debt. By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Two big European banks, Italy’s Unicredit and Spain’s BBVA, will be following current events in Turkey extremely closely. The two lenders have the biggest exposure to the country, which is one of the world’s fastest growing emerging economies. But investing there is an increasingly risk business. Turkey continues to grow at high speed,...

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US Dollar Hegemony Tripped Up by Chinese Renminbi?

Um, no. Central banks not enthusiastic about the renminbi. Global central banks are not dumping US-dollar-denominated assets from their foreign exchange reserves. They’re not dumping euro-denominated assets either. And they remain leery of the Chinese renminbi – despite China’s place as the second largest economy in the world and despite all the hoopla of turning the renminbi into a major global reserve currency. This is clear from the IMF’s just released “Currency Composition of...

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As Turkish Lira Collapses, Foreign Banks in Turkey Rue the Day

The biggest loser: BBVA, Spain’s second biggest bank. By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. Few foreign banks are as exposed to the risks currently affecting Turkey than Spain’s second biggest lender, BBVA. The bank owns about half of Turkey’s third biggest lender, which provides roughly 15% of its global revenues. But those revenues are under threat as the value of the currency they’re denominated in, the Turkish Lira, continues to fall. In 2016, when...

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Chasing Yield during ZIRP & NIRP Evidently Starved Human Brains of Oxygen. Now the Price Is Due

See Argentina’s 100-year dollar-bond and emerging-market “turmoil” as the Hot Money flees. Let’s be clear: It’s not just Argentina. But Argentina is the most elegant example. The exodus of the hot money from emerging markets where cheap dollar-debts were used to fund pet projects and jack up leverage is – once again – in full swing. Cheap dollar-debt in emerging markets is an old sin that, like all old sins, is repeated endlessly. The outcome is always trouble. But during the act, it...

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Consumers Stubbornly Cling to Cash, after Multiple IT Fiascos & Payment Systems Outages

An industry dogged by non-believers who fret about privacy and fraud.  By Don Quijones, Spain, UK, & Mexico, editor at WOLF STREET. The last month has been an unhappy time for daydreamers of a cashless nirvana. Following weeks of disruptive tech failures, payment outages, and escalating cyber fraud scams, much of it taking place in Britain, consumers have been reminded of one of the great benefits of physical cash: it is accepted just about everywhere and does not suddenly fail on...

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Seems Impossible, but Argentina’s Peso Was Able to Collapse even Further Despite $50 Billion IMF Bailout

Why is anyone still lending this government any money? Today the Argentina peso plunged another 5.5% against the US dollar. It now takes ARS 27.7 to buy $1. Over the past 16 years, the peso has gone through waves of collapses. This collapse began on April 20. The central bank of Argentina (BCRA) countered it by selling $1 billion per day of scarce foreign exchange reserves and buying pesos. The peso fell more quickly. The BCRA responded with three rate hikes, to finally 40%! On May 8,...

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Argentina’s Crisis Gets Kicked Down the Road, but at What Cost?

The peso drops again, inflation surges, nothing is fixed. Argentina was able to refinance about $26 billion in maturing peso-denominated short-term government debt, called Lebacs, but at a huge cost, after asking the IMF for a bailout loan – a “high access stand-by arrangement” that will come with creditor-imposed conditions – and after wild gyrations by the central bank that included blowing billions of scarce dollars to prop up the peso at dismally low levels, and jacking up interest...

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As US Dollar & Interest Rates Rise, All Heck Breaks Loose in Emerging Market Currencies

When the “hot money” gets antsy, a currency crisis morphs into a debt crisis. You just don’t lend Argentina’s government money. Not in its own currency, because it relentlessly destroys that currency, and not in a foreign currency, because it will default on it. Lending money to Argentina is like trying to run across a 16-lane freeway with traffic zooming by at 70 mph. You just don’t do it. You might get through it. But there’s a good chance it’s going to cost you, and perhaps dearly,...

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WTF Just Happened to Argentina’s Peso?

Three interest rate hikes in one week, to 40%, imply the first two didn’t work, and the Central Bank is not in control. By Bianca Fernet, Argentina, The Bubble: If you’re watching Argentina’s economy, it hasn’t been a banner week. This week, Argentina had to raise its key interest rate three times to keep the Argentine peso from losing even more value against the dollar. Three interest rate hikes in one week is a lot – it implies the first two didn’t work, and the Central Bank is not...

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And the US Dollar?

Fed’s relentless rate hikes and accelerating QE unwind take effect. The dollar inched up again today, one more step in a series of increases that started on April 17. It has risen 2.3% in those seven trading days, based on the WSJ Dollar Index (BUXX), which tracks the dollar against 16 other currencies including the Mexican peso and the Chinese renminbi, and it has risen 2.4% based on the Dollar Index (DXY), which tracks the dollar against six other currencies,. From its recent low on...

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