China Central Bank to Clamp Down on Forwards Trading to Curb Yuan Depreciation

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Top Headlines

China Central Bank to Clamp Down on Forwards Trading to Curb Yuan Depreciation – Reuters

China’s central bank plans to tighten rules on trading of currency forwards from October, sources with direct knowledge of the matter say, in a move to curb speculation and volatility after a shock devaluation of the currency last month.

Yen, Euro Buoyed by Risk Aversion as China Worries Weigh – Reuters The safe-haven yen and the low-yielding euro rose on Tuesday on concerns about China’s economy, as investors unwound bets against the two currencies widely used to fund positions in riskier assets.

The Challenge of Pricing FX Risk – Tabb Forum A highly volatile base currency can trigger an exorbitant amount of risk across any portfolio. As global FX volumes rise, asset managers and hedge funds are seeking alternative ways to establish accurate prices to better understand exposure. But this presents a real strain on existing operations.

Blythe Masters Tells Banks the Blockchain Changes Everything – Bloomberg The banker who helped give the world credit-default swaps wants to upend finance again—this time with the code that powers bitcoin.

Wall Street Vs. Silicon Valley – Profit & Loss (subscription) Silicon Valley is coming,” JP Morgan CEO, Jamie Dimon, rather portentously warned in a letter to shareholders in April. He went on to explain that there are currently hundreds of start-ups out on the West Coast with lots of intellectual and economic capital that are working on providing alternatives to traditional banking services.

Currency Hedge Funds Report Gains after Volatile July – Profit & Loss Currency hedge funds posted an aggregate gain in July, according to the latest data from Parker Global Strategies, when the Federal Reserve took a more upbeat tone on the US economy and Greece made a last minute deal on its debt.

Economists Are Split Over Whether the Fed Will Raise Rates in September –  Bloomberg US central bankers face their toughest policy call in years in September – raise interest rates or wait a little longer. Whatever the decision, about half of economists will be wrong.

 

 

Regulatory News

US Regulator Targets Offshore Manipulation – Profit & Loss The US Department of Justice is reportedly expanding its currency market probe to investigate potential manipulation in Russian ruble and Brazilian real markets.

Market Participants Cheer CFTC Swap Reporting Fixes – Energy Risk (subscription) A new proposal from the US Commodity Futures Trading Commission (CFTC) is being hailed as a helpful – if long overdue – fix to the agency’s trade reporting rule for cleared swaps.

Concentric Circles: Central Clearing, Leverage Ratios and Concentration Risk – Tabb Forum A regulatory rethink of bank leverage ratios could make the clearing business more attractive, reinvigorating competition and helping redistribute concentrated clearing flows and the associated risk.

 

 

Company News

Neal Named BNYM Markets Head – Profit & Loss BNY Mellon has appointed Michelle Neal as president of BNY Mellon Markets Group. As reported by Profit& Loss last week, Neal left Deutsche Bank, where she was global head of listed derivatives, markets clearing and fixed income market structure.

Hotspot FX Volumes Modestly Rebound with 20.4% MoM Jump in August 2015 – Finance Magnates Following four consecutive months of declining volumes, the ECN broker has registered a MoM jump, although volumes remain down YoY.

 

 

Market Savvy 

China’s Two-Yuan Dilemma – Wall Street Journal (subscription) Gap between Hong Kong- and mainland-traded currency has widened, hurting Beijing’s global ambitions.

There’s Only One Chart That Really Matters for Currency Traders – Bloomberg During a week when central banking is the prime focus of the currency market, traders who were whipsawed in August are looking to their colleagues on interest-rate desks for clues about whether they should buy or sell the dollar.

Bitten by Volatility, “Mrs Watanabe” Less Bold About Buying Dollars – Reuters Stung by last week’s sharp dollar plunge, Japanese retail foreign exchange traders collectively know as “Mrs Watanabe” have been shy about taking their hallmark contrarian stance, meaning less bargain hunting support for the greenback.

Chinese Yuan Revolution? – Merk Funds Once you think of China as a teenager in her “awkward stage,” it may become easier to understand the unfolding dynamics. When it comes to foreign exchange, China’s latest move may be best explained by her desire to play with the grown-ups.

 

Press Releases

FIA Releases SEF Tracker Report for June – FIA Average daily trading in June was higher than May but down from June 2014.  Although overall interest rate trading was down from a year ago, the main reason was a decline in the amount of forward rate agreements traded on SEFs.

 

 

Industry Events