At the World Economic Forum in Daovse, held last month, Deputy Chairman of the People's Bank of China, Zhu Min openly about their fears. what will happen to the world's financial markets in 2010. "For me, the main risk factor in this year will carry speculation the dollar", - he said. "This is a very important issue. It is estimated that the volume of speculation in the dollar reaches 1500 billion, which is much bigger speculation in the yen." In particular, he is concerned about the possible way out of carry trades and as a consequence, the sharp strengthening of the dollar, which, in turn, will derail the upward trend of stock markets, to encourage the world economy from the crisis. Many investors share the pessimistic mood of the deputy. Chairman of the Chinese Central Bank. Especially now, when the U.S. currency began to recover after a long period of recession in the past year. After the bankruptcy of Lehman Brothers in 2008, the yen, which was then a favorite among speculators, has soared. The same is probably waiting for the dollar against the backdrop of falling stock and commodity markets, as well as high-yielding currencies.
Once the global asset markets began to recover from shocks and crises rise from lows reached in March last year, the dollar has become a favorite funding currency. This circumstance contributed greatly to the ultra-low interest rates in the U.S., which encouraged speculative investors to sell dollars to fund the riskier trades and buy higher-yielding assets. As a result, for the period from 1 March to early December, the dollar fell more than 17%. But now the situation has changed. The U.S. currency restores the position. and investors vemu world anxiously thinking about the possible massive withdrawal from the positions carry. Since December, the dollar, weighted by trade, grew by more than 8% by testing last week, the maximum for the last 8 months. Nevertheless, many analysts are reluctant to draw conclusions that the era of the dollar as the currency of funding coming to an end.
The first part of the restoration of the dollar, obviously, was associated with the adjustment of positions, typical for the end of the year. Then, earlier this year in the game entered by other forces, extending the training of the rising momentum. First, in January, China reacted to the new surge in bank lending rates rise on promissory notes and twofold increase in banks' reserve requirements. This triggered a wave of profit-taking in commodity markets, as well as the stock markets of developing countries, which, in turn. demanded from investors to buy the currency financing, ie, a dollar. Secondly, it opened up the problem in Greece, threatening to seriously undermine the foundations of the European Monetary Union and calling into question the existence of the euro. Of course, the single currency came under pressure, which also contributed to the strengthening of the dollar.
And, finally, an unexpected increase in the discount rate the Fed. interest rate on which the Bank provides commercial banks in emergency funding, forced markets to think about the end of the policy of monetary easing in the U.S.. In fact, focus on assessing the volume of carry - a very thankless task. Even China's concerns about the extent of dollar speculation carry and, as a consequence, a sharp strengthening of the dollar, should be viewed through the prism of their own monetary policy. China's trading partners try to force him to abandon the dollar and the anchor letting the yuan rise, it is no surprise that the Celestial Empire is afraid of the exodus from carry.
According to Tim Lee of PI Economics. from 2004 to 2007, speculation against the yen rose to 1000 billion dollars, so it is difficult to imagine how China has taken the sum of 1500 billion dollars on speculation the U.S. currency, if the 4 th quarter did not exceed 500-750 billion Mark Chandler from Brown Brothers Harriman said that all estimates of the dollar speculation should be taken with skepticism. He notes a number of indications that some investors have already closed their positions.
First, data on the positioning provided by the Chicago Mercantile Exchange, indicate that that speculators reduced their positions against the dollar, or even opened a long position in that currency. Now, a record number of sales recorded for the euro. Second, emerging market equity funds recorded the first outflow of funds over the past three months amid fears about tightening monetary policy in China, India and Brazil. However, according to Chandler, the long-term market trends such as absent. Investors did not rush to cover their speculation focused on longer time intervals. The growth of the dollar is likely related to events occurring outside the United States. "Speculators in the futures market are selling the euro, which provokes the reduction of short positions. While the medium-and long-term investors do not hasten the closure of its structural position," - he said. Strengthening of the dollar - is a consequence of bad news from the outside, rather than good news in the U.S..
Indeed, analysts see no significant changes of short-term positioning outside the sector. Moreover, they said, the dollar will likely not be able to so quickly lose their status as foreign currency funding, even though the Fed's decision to raise the discount rate. The U.S. central bank has done everything possible to emphasize that this step is not the beginning of non-incentive policies. According to management's key interest rate will remain low for a long period of time. John Norman of JPMorgan said that the rise of the dollar over the past six weeks was associated with sovereign risk in Europe and unexpected actions by other central banks. Thus, the Reserve Bank of Australia raised rates, as expected, and the Bank of England announced its intention to extend the program of quantitative easing. Changing political trends outside the United States helped the dollar strengthen. But these events did not blend with the view that the U.S. will lead the process of phasing out incentive policies that will lead to a transformation of the U.S. currency funding in exchange for investment and thus result in long-term growth.
Once the global asset markets began to recover from shocks and crises rise from lows reached in March last year, the dollar has become a favorite funding currency. This circumstance contributed greatly to the ultra-low interest rates in the U.S., which encouraged speculative investors to sell dollars to fund the riskier trades and buy higher-yielding assets. As a result, for the period from 1 March to early December, the dollar fell more than 17%. But now the situation has changed. The U.S. currency restores the position. and investors vemu world anxiously thinking about the possible massive withdrawal from the positions carry. Since December, the dollar, weighted by trade, grew by more than 8% by testing last week, the maximum for the last 8 months. Nevertheless, many analysts are reluctant to draw conclusions that the era of the dollar as the currency of funding coming to an end.
The first part of the restoration of the dollar, obviously, was associated with the adjustment of positions, typical for the end of the year. Then, earlier this year in the game entered by other forces, extending the training of the rising momentum. First, in January, China reacted to the new surge in bank lending rates rise on promissory notes and twofold increase in banks' reserve requirements. This triggered a wave of profit-taking in commodity markets, as well as the stock markets of developing countries, which, in turn. demanded from investors to buy the currency financing, ie, a dollar. Secondly, it opened up the problem in Greece, threatening to seriously undermine the foundations of the European Monetary Union and calling into question the existence of the euro. Of course, the single currency came under pressure, which also contributed to the strengthening of the dollar.
And, finally, an unexpected increase in the discount rate the Fed. interest rate on which the Bank provides commercial banks in emergency funding, forced markets to think about the end of the policy of monetary easing in the U.S.. In fact, focus on assessing the volume of carry - a very thankless task. Even China's concerns about the extent of dollar speculation carry and, as a consequence, a sharp strengthening of the dollar, should be viewed through the prism of their own monetary policy. China's trading partners try to force him to abandon the dollar and the anchor letting the yuan rise, it is no surprise that the Celestial Empire is afraid of the exodus from carry.
According to Tim Lee of PI Economics. from 2004 to 2007, speculation against the yen rose to 1000 billion dollars, so it is difficult to imagine how China has taken the sum of 1500 billion dollars on speculation the U.S. currency, if the 4 th quarter did not exceed 500-750 billion Mark Chandler from Brown Brothers Harriman said that all estimates of the dollar speculation should be taken with skepticism. He notes a number of indications that some investors have already closed their positions.
First, data on the positioning provided by the Chicago Mercantile Exchange, indicate that that speculators reduced their positions against the dollar, or even opened a long position in that currency. Now, a record number of sales recorded for the euro. Second, emerging market equity funds recorded the first outflow of funds over the past three months amid fears about tightening monetary policy in China, India and Brazil. However, according to Chandler, the long-term market trends such as absent. Investors did not rush to cover their speculation focused on longer time intervals. The growth of the dollar is likely related to events occurring outside the United States. "Speculators in the futures market are selling the euro, which provokes the reduction of short positions. While the medium-and long-term investors do not hasten the closure of its structural position," - he said. Strengthening of the dollar - is a consequence of bad news from the outside, rather than good news in the U.S..
Indeed, analysts see no significant changes of short-term positioning outside the sector. Moreover, they said, the dollar will likely not be able to so quickly lose their status as foreign currency funding, even though the Fed's decision to raise the discount rate. The U.S. central bank has done everything possible to emphasize that this step is not the beginning of non-incentive policies. According to management's key interest rate will remain low for a long period of time. John Norman of JPMorgan said that the rise of the dollar over the past six weeks was associated with sovereign risk in Europe and unexpected actions by other central banks. Thus, the Reserve Bank of Australia raised rates, as expected, and the Bank of England announced its intention to extend the program of quantitative easing. Changing political trends outside the United States helped the dollar strengthen. But these events did not blend with the view that the U.S. will lead the process of phasing out incentive policies that will lead to a transformation of the U.S. currency funding in exchange for investment and thus result in long-term growth.
Financial Times
No comments:
Post a Comment