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Posted on January 9th, 2013
More than 20 countries have increased their aggregate foreign exchange reserves and other official foreign assets by an annual average of nearly $1 trillion in recent years. This buildup—mainly through intervention in the foreign exchange markets—keeps the currencies of the interveners substantially undervalued, thus boosting their international competitiveness and trade surpluses. The corresponding [...]
Posted on January 9th, 2013
China is perennially accused of currency manipulation. Yet, this column argues that a weak currency value doesn’t necessarily reflect currency manipulation. China is a fast growing economy with strong financial frictions and a high saving rate, and such countries naturally have weak currencies. Instead of focussing on accusations of currency manipulation, it might be more [...]
Posted on December 19th, 2012
Key highlights: Winter 2012
Since the autumn forecast in September there has been significant progress towards a more secure Eurozone. The European Central Bank’s policy has greatly diminished the imminent risk of a breakup. Meanwhile, progress has been made towards a banking union and the policy mix is shifting from a sole focus on austerity towards [...]
Posted on December 19th, 2012
The European Central Bank (ECB) has published a biennial report entitled “Euro money market study 2012”, which focuses on euro money market developments during the second quarter of 2012 and compares them with the second quarters of previous years. The study complements the results of the Euro money market survey 2012, which was [...]
Posted on December 17th, 2012
The traditional carry trade has historically been highly profitable, but suffered from crash risk, the proverbial “up by the stairs and down by the elevator.” This crash risk was realized in dramatic fashion in the wake of the Lehman bankruptcy, when an investor who was long the Australian dollar and short the yen [...]
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The appreciating renminbi
Topics: currencies, monetary policy, regional / country study
China is perennially accused of currency manipulation. Yet, this column argues that a weak currency value doesn’t necessarily reflect currency manipulation. China is a fast growing economy with strong financial frictions and a high saving rate, and such countries naturally have weak currencies. Instead of focussing on accusations of currency manipulation, it might be more [...]
Ernst & Young Eurozone Forecast & Outlook for financial services — Winter edition — December 2012
Topics: currencies, economic growth, regional / country study, risk
Key highlights: Winter 2012
Since the autumn forecast in September there has been significant progress towards a more secure Eurozone. The European Central Bank’s policy has greatly diminished the imminent risk of a breakup. Meanwhile, progress has been made towards a banking union and the policy mix is shifting from a sole focus on austerity towards [...]
Euro money market study 2012
Topics: currencies, financial markets, regional / country study
The European Central Bank (ECB) has published a biennial report entitled “Euro money market study 2012”, which focuses on euro money market developments during the second quarter of 2012 and compares them with the second quarters of previous years. The study complements the results of the Euro money market survey 2012, which was [...]
On the Risk and Return of the Carry Trade
Topics: currencies, financial instruments, risk
The traditional carry trade has historically been highly profitable, but suffered from crash risk, the proverbial “up by the stairs and down by the elevator.” This crash risk was realized in dramatic fashion in the wake of the Lehman bankruptcy, when an investor who was long the Australian dollar and short the yen [...]