Dollar Drop is Worst Since 2011 as Investors Rethink Fed Policy

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Top Headlines

Dollar Drop is Worst Since 2011 as Investors Rethink Fed Policy – Bloomberg
The dollar slumped the most since October 2011 after the Federal Reserve reduced projections for interest rate increases and expressed concern the dollar’s surge is weighing on exports and inflation.

Paying Most Since 2008 on Dollar Hedges Works as Currency Plunges –Bloomberg
Anyone wondering why you’d pay the highest prices since 2008 to hedge against declines in the dollar found out last week when the currency slid the most in more than three years.

ASIC’s Greg Medcraft Says FX Brokers are ‘Picking Off’ Australia – Sydney Morning Herald
Australia is being “picked off” by online foreign exchange brokers that are able to obtain a local licence and offer clients extremely high leverage of up to 500 times, the corporate watchdog says.

Should Brokers Impose a Limit on Forgiving Client Losses in the Event of Another Market Event? – Profit & Loss (subscription)
I fully expect other brokers to follow FXCM’s lead in imposing a ceiling on the losses the firm will forgive clients in the event of another event in markets, but how moral is such a practice?

Dark Shadow Cast Over Threadneedle Street – Financial News (subscription)
The Bank of England faces serious questions over whether its investigation of its involvement in FX market manipulation probed deep enough.

Yuan Extends Retreat After Biggest Weekly Advance in Seven Years –Bloomberg
China’s yuan had the biggest two-day drop since January as some investors judged excessive the currency’s biggest weekly advance in seven years.

Canada, China to Launch North America’s First Yuan Hub – The Globe and Mail(subscription)
Canada’s Finance Minister and China’s ambassador to Canada will officially inaugurate the opening of a Canadian offshore trading hub for the Chinese currency Monday, a move that will make transactions cheaper for companies doing business with the East Asian giant and could boost trade between the two countries.

NDF and Currency Options Activity Rises in January on US-Based SEFs –Forex Magnates
Trading volumes on Swap Execution Facilities rose on a month-on-month basis in January. The US regulated entities saw an uptake in overall volumes across its two currency instruments, NDFs and Options.

Circuit Breakers: Does FX Need a Kill Switch? – Euromoney
Foreign-exchange broker FXCM’s CEO calls for wider adoption of circuit breakers on FX platforms to prevent another Swiss franc shocker as seen on Black Thursday, but critics question whether it is the right solution and even suitable for an over-the-counter (OTC) market such as FX.

Regulatory News

FCA Inundated With Claims of Possible Market Abuse – Financial Times(subscription)
The number of reports that flag possible market abuse sent to the UK financial watchdog for scrutiny have soared by 24% in the past year, continuing its sharp upward trajectory since the financial crisis.

Australian Regulator Tracing Currency Trades Before RBA Decision –Bloomberg
Australia’s securities regulator is tracking transactions that caused a sudden jump in the local currency ahead of the Reserve Bank of Australia’s interest-rate decision and is looking at potential sources for any leak of the information as part of its investigation.

Hardline New York Regulator Lawsky Targets Deutsche Bank Over Libor –Financial Times (subscription)
Benjamin Lawsky, the New York regulator known for taking a hard line against overseas banks, has shouldered his way into the long-running Libor scandal, investigating Deutsche Bank for alleged manipulation of the benchmark borrowing rate, according to people familiar with the matter.

BoE Outlines Timeline for Libor Alternative; FCA Bans Trader for Libor Fraud –Profit & Loss (free story)
The Bank of England has given clear instructions to the working group set up to develop an alternative to the London Interbank Offered Rate (Libor) that they have less than a year to begin implementing a near risk-free reference rate (RFR).

Volcker Outlines Plan for Overhauling Financial Regulation – Wall Street Journal (subscription)
Former Federal Reserve Chairman Paul Volcker outlined a new plan for revamping the way the US government oversees the financial system, adding his voice to an idea that is broadly supported – even if Congress can never muster enough votes to pass it.

Company News

FXCM to Impose New Negative Balance Policy – Profit & Loss (free story)
FXCM has updated its negative balance policy, offering retail clients protection for the first $50,000 of losses over a 24-hour period.

CME Reportedly in Talks With BGC Over Fenics, Trayport – Profit & Loss (free story)
CME Group, which last month lost out in its bid to acquire interdealer broker GFI Group, is reportedly in discussions with BGC Partners to acquire GFI’s software assets, Fenics and Trayport.

CME is Said to Mull Rule Change as Basel Pressure Hampers Banks –Bloomberg
New rules meant to make banks safer are prompting the world’s largest derivatives exchange to consider changing how it backs trades in one of the biggest shifts since futures were created in 1865.

Market Savvy  

Yuan to Give Buck, Euro a Run for Their Money
Barron’s
HSBC’s Paul Mackel says China’s currency can become one of the top five most traded currencies by 2020.

Press Releases

Z/Yen Group Publishes 17th Global Financial Centres Index
New York remains just ahead of London, but the leading Asian centres continue to close the gap.

Industry Events