Fed Digs Into Clearinghouse Risks After JP Morgan Raises Alarms – Bloomberg
Federal Reserve Governor Daniel Tarullo is quizzing Wall Street after big lenders and asset managers said clearinghouses pose their own threats, said three people with knowledge of the discussions. Among the concerns raised by financial firms: Relying on clearinghouses shifts risk to just a handful of entities, and the collapse of one could lead to uncapped losses for banks.
Should HFTs Be in the FX Spotlight? – Profit & Loss (subscription)
Minutes from the recent joint meeting of the world’s eight foreign exchange committees in Tokyo hint at participants’ concerns over the impact of regulation and electronic trading on FX market liquidity, and high frequency traders were highlighted for their potential role in events on 15 January. But is that fair?
Sterling Drops to 5-Year Low on Soft Data, Election Uncertainty – Reuters
Sterling fell to a five-year low against the dollar on Friday, hurt by weaker-than-expected industrial data and the rising risk of prolonged political uncertainty after a tight British election next month.
China Forex Market to Launch FX Borrowing/Lending Business Next Week – Business Times
China’s foreign exchange market will launch its first ever borrowing and lending business in a number of major global foreign currencies starting next week, in a move that traders said was aimed at bolstering trading activity in the market. The interbank China Foreign Exchange Trade System (CFETS) will allow financial institutions to borrow and lend in US dollars, the euro and Hong Kong dollars, it said in a statement published on its website,
South Africa Signs $4.8 Billion Currency Swap with China – Reuters
The South African Reserve Bank said on Friday it has signed a three-year bilateral swap agreement with the People’s Bank of China for the exchange of local currencies of up to R57 billion ($4.75 billion) to support trade and investment between the two nations and to act as a mitigating resource for short term balance of payment pressures.
Poll: Asia Currencies Seen Pinned Down as Fed Readies to Hike Rates – Reuters
Emerging Asian currencies are seen likely to weaken against the dollar over the coming year on expectations the US Federal Reserve will start hiking interest rates, although any losses are likely to be limited, a Reuters poll found.
Ruble Hits New High as Locals Sell Foreign Currencies – Wall Street Journal (subscription)
The Russian ruble reached its highest level against the dollar since December in early trading Friday as local investors continued to unload foreign currencies. The ruble has gradually recovered in the past two months but accelerated this week as households began to sell foreign currencies they had bought in 2014 and as the need to repay debt in foreign currencies diminished.
US Chides Europe, Japan for Overreliance on Monetary Policy – Wall Street Journal (subscription)
The Obama administration chastised Europe and Japan for excessive reliance on monetary policy to revive stagnant growth, worried that a failure to deploy other policy tools could further undermine an already gloomy global economic outlook.
Yuan Market Needs Deal with Settlement System: HSBC – Reuters
The absence of China’s yuan from the CLS system used to settle deals in major currencies is a growing problem for banks and will hamper efforts to trade the currency more if it is not resolved, a senior China-focused banker said on Thursday.
Euro’s Reserve Status Jeopardized as Central Banks Dump Holdings – Bloomberg
Central banks cut their euro holdings by the most on record last year in anticipation of losses tied to unprecedented stimulus. The euro now accounts for just 22% of worldwide reserves, down from 28% before the region’s debt crisis five years ago, while dollar and yen holdings have both climbed, the latest data from the International Monetary Fund show.