One of the most prominent features of the “rising dollar”, if not the “rising dollar” itself, was an almost out of control shortage in FX basis. Though cross currency basis swaps with Japan received all the attention, with very good reason, the basis was off against the euro, franc, and a host of other majors. These things happen from time [...]
Earlier this month, China’s State Administration of Foreign Exchange (SAFE) reported a large increase in official reserve holdings. The biggest “inflows” in several years has, as you would expect, led to much optimistic commentary suggesting if not outright stating that the currency problems are no more. It is not the first time such claims have been made, as this has [...]
As I so often write, we still talk about 2008 because we aren’t yet done with 2008. It doesn’t seem possible to be stuck in a time warp of such immense proportions, but such are the mistakes of the last decade carrying with them just these kinds of enormous costs. It has been this way from the beginning, even before [...]
Closing the book on Q4 2016 balance sheet capacity is to review essentially forex volumes. The eurodollar system over the last ten years has turned far more in this direction in addition to it becoming more Asian/Japanese. In fact, the two really go hand in hand given the native situation of Japanese banks. As expected, data compiled by the Office [...]
In a world where everything is transitory, nothing is. The FOMC in its latest statement referred to that word yet again. As always, the context is weakness. But if such is always unexpected yet occurring, even if temporary, “transitory” doesn’t apply. Yet we go through the ritual each time anyway. The last (March) statement read: The Committee expects that with [...]
The Bretton Woods system was intentionally set up to funnel monetary convertibility through official channels. The primary characteristic of any true gold standard is that any person who wishes can change paper claims into hard money. It was as much true in any one country as between those bound by the same legal framework (property). What might differ were the [...]
The textbook says that whenever the central bank raises its policy rate that means tightening. Actual experience over more than just this last lost decade demonstrates that at the very least it is much more complicated than that. There is far more evidence of monetary policy being nothing more than a response, as that reverse condition can absolutely be established [...]
In June 2012, Janet Yellen, then the Vice Chairman of the Federal Reserve, addressed an audience in Boston with what for the time seemed like a radical departure. It was the latest in a string of them, for conditions throughout the “recovery” period never did quite seem to hit the recovery stride. Because of that, there was constant stream of [...]
In the early trading on Friday, it looked as if “reflation” might break down entirely. The flurry of information seemed to be uniformly bad, from Syria to payrolls there wasn’t much for optimism to remain relevant. All of a sudden, however, it all reversed so that trading in the latter part of the day was as if related to an [...]
The idea that interest rates have nowhere to go but up is very much like saying the bond market has it all wrong. That is one reason why the rhetoric has been ratcheted that much higher of late, particularly since the Fed “raised rates” for a third time in March. Such “hawkishness” by convention should not go so unnoticed, and [...]
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