Archives of “International finance” tag

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Eurodollars

  
Analysis, Forex
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I have some questions regarding eurodollars and attempted to answer them myself: Why is GE quoted as interest rates, but de facto acts like a commodity ? Why were GE quotes up (rates on eurodollar deposits down) during the 2008/2020 crises. There was lots of cash demand.

– GE futures prices DO show de facto demand for cash (any fx cash offshore demand)
– GE is priced as rate to par of deposits
– GE reacts to or anticipates FED rates, as FED reacts to cash demand
– the rate of the deposits are not directly driven by supply and demand of global cash, but are driven by “external”/ non-eurodollar-mkt interest rates
– GE quotes can not be understand by the internal supply and demand of the eurodollar mkt conclusion: even GE-quotes are interest rates, GE-quotes act de facto like commodity prices, e.g. currently show huge cash demand.

Does you agree with my answers?

Dollar poised to benefit as China economic growth takes virus hit – Citi

  
  Analysis
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The firm says that the dollar is well placed to benefit from the situation compared to other G-10 currencies in the market

Dollar

Citi’s currency strategist, Adam Pickett, says that “consensus expectations have not yet fully adjusted to the reality of weaker Chinese growth that will result from efforts to contain COVID-19”.

Adding that the market is underpricing the possibility of China’s economy being dealt a blow and overvaluing the prospects of recent stimulus measures. As such, Pickett argues that the dollar stands to benefit and outperform in this scenario.
Noting that the greenback should outperform against open manufacturing economies such as the NOK, NZD and EUR. Although safe havens may perform better, the US economy and key trading partners are “likely to be insulated”, he argues.
Additionally, he points out that market hopes for meaningful Chinese stimulus to ensure a V-shaped recovery are overblown – saying that the current Chinese administration “still prefers slower, sustainable growth than previous cycles”.
This adds to the NAB dollar call earlier in the day here but again, I would say it is conditional upon which currencies you’re looking at and on what scenario.
A highly risk-off landscape would still favour the yen more so than the greenback but against the likes of the kiwi and euro, the dollar definitely will shine if the situation plays out as what is described by Pickett above.

US to Iraq: Kick out our military and we will seize your central bank accounts

  
Analysis, Politics
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US puts the petrodollar at risk

US puts the petrodollar at risk
The US warned Iraq that if it kicks American forces out of the country, it would lock the country out of its central bank accounts held at the New York Fed.
Iraq uses the account to settle oil sales of oil and other international transfers.
Iraq’s elected legislature voted last week to expel US troops who were invited to the country to fight ISIS in 2014. The Prime Minister moved forward with those plans this week in a call with Secretary of State Mike Pompeo.
The threat may spark a shift away from US dollar use and pricing in the international oil trade. It could also cause other countries to reconsider keeping money or other financial assets in the United States.
An adviser to the prime minister, Abd al-Hassanein al-Hanein, said that while the threat of sanctions was a concern, he did not expect the U.S. to go through with it. “If the U.S. does that, it will lose Iraq forever,” he said.
In its most-recent disclosures from end-2018, Iraq’s central bank said it held $3 billion in overnight deposits at the NY Fed.

Japan BoP Current Account Balance for May: ¥ 1594.8B (vs. expected ¥ 1380.9B)

  
Analysis, Economy
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Data release from Japan’s Finance Ministry, preliminary balance of payments statistics for May

BoP Current Account Balance for May, preliminary ¥ 1594.8B for a nice beat
  • expected ¥ 1380.9B, prior ¥ 1707.4B
BoP Current Account Adjusted ¥ 1305.7B
  • expected ¥ 1231.0B, prior ¥ 1600.1B
Trade Balance BoP Basis ¥ -650.9B
  • expected ¥ -758.9B, prior ¥ -98.2B
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The background to this is shrinking exports due to economic growth slowing in China, trade wars impact. Japan has had a current account surplus for 58 straight months.
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