Special Reports

The mystery of yen strength and the benefits of commodity currencies

Posted on April 15, 2016 at 2:55 pm GMT

One interesting feature of the past few days has been the strength in commodity currencies. The Australian dollar, the New Zealand dollar and the Canadian dollar have been some of the best performers of the past weeks, in the absence of any significant action in major pairs. The reason has maybe more to do with the oil price. Oil is managing to hold on to the $40 level for now and this is lending support to these currencies – particularly [..]

Will the Australian dollar extend its impressive 2016 run?

Posted on April 5, 2016 at 2:59 pm GMT

Following its climb to 8-month highs versus the US dollar, the Australian dollar has retreated somewhat; posting a particularly sharp drop after today’s RBA meeting. Specifically, the aussie has fallen from the 0.7772 high to 0.7510 in less than a week. The aussie had traded as low as 0.6826 during the first half of January. Looking at the charts, the aussie’s move looks like a normal reaction from overbought levels following a rapid move higher and the currency still lies [..]

Dollar gets clobbered during first quarter in surprise twist

Posted on March 31, 2016 at 2:19 pm GMT

This was not supposed to happen while in the middle of a US dollar upswing. The greenback was the second-worst performing major currency during the first quarter, besting only the beleaguered UK pound which is facing big political and economic risk in June in the form of the EU in/out referendum. Interestingly, two currencies whose central banks took stimulus action during the first quarter; the yen and the euro, did relatively well. Particularly the yen was the best performer despite [..]

‘Brexit’ fears haunt pound while Fed speakers wrong-foot dollar bears

Posted on March 24, 2016 at 3:39 pm GMT

Strangely enough from a financial markets’ viewpoint, the biggest loser from the Brussels terrorist attacks was the British pound. The attacks made ‘Brexit’ more likely according to analysts, as British voters might seek to distance themselves from the European Union and the terrorist attacks that took place first in Paris back in November last year and now in Brussels. Immigration is a key issue in the referendum. Furthermore, the resignation of a senior minister from David Cameron’s government during the [..]

Divergence? No, major central banks singing the same dovish tune

Posted on March 18, 2016 at 3:40 pm GMT

During the past 10 days or so, there was the rare opportunity to hear the decisions of some of the world’s most important central banks within days of each other. The European Central Bank, the Bank of Japan, the Federal Reserve, the Swiss National Bank and the Bank of England all met and discussed policy within the same 8-day period. This was perhaps a lot of information to digest all at once, but some key conclusions have emerged behind the [..]

Bank of Japan pauses; leaves Europe alone to experiment with negative rates

Posted on March 15, 2016 at 3:02 pm GMT

The Bank of Japan’s decision to keep both its interest rate and its asset purchase program unchanged, could mean that negative rates will mainly be tested in Europe. Following the negative reaction in Japan from both the banking sector as well as the wider public, the Bank was reluctant to push rates lower so soon after pushing them below zero for the first time in history back in January. Therefore, it looks like the Bank of Japan is going to [..]

Draghi’s big stimulus unappreciated by markets

Posted on March 11, 2016 at 3:30 pm GMT

There was massive anticipation ahead of the European Central Bank meeting this week and it turned out this was well justified. Thursday’s trading following the announcement and during the press conference of ECB President Mario Draghi produced some stomach-churning volatility in Europe’s currency and stock markets. Stocks liked the initial announcement out of the ECB, which also led the euro to drop. The measures exceeded expectations by all accounts, but during Draghi’s press conference there appeared to be a change [..]

Commodity renaissance or a dead cat bounce?

Posted on March 8, 2016 at 3:46 pm GMT

A key theme in the markets lately has been the recovery of various commodity prices. Commodity prices have been falling more or less steadily since late April / early May of 2011. The Thomson Reuters CRB Commodity index for example has rallied 11% since its lows around the middle of February. The closely watched price of oil has put in a much more impressive recovery of almost 50% since it bottomed around $26 a barrel to rise above $38. Together [..]

Dollar hurt as Fed hands out no-March-rate-hike candy to appease market

Posted on March 4, 2016 at 3:08 pm GMT

The US dollar found itself under pressure this week as despite a run of relatively positive economic numbers, the Fed hinted that the March meeting will not really be a ‘live’ one. That is to say, a rate hike will not be on the table with markets giving a less than 1 in 20 chance for the Fed to raise rates. As a result the dollar fell while interestingly both stocks and gold managed to rally. The week’s data included [..]

Searching for the one-eyed currency

Posted on March 1, 2016 at 3:27 pm GMT

It is very rare these days to meet a policymaker in an advanced economy who is after a strong currency. A weaker currency can help revitalize a country’s export sector without the need for painful reforms or boosting competitiveness through other measures. This was again evident in the first two months of 2016, particularly because manufacturing was weak across many countries and some policymakers believed that a weaker currency might provide some relief to this problem. As aggressively easy monetary [..]

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