Forex – Dollar Calm; Focus on Emerging Central Banks

© Reuters.  © Reuters.

Investing.com – The U.S. dollar is largely unchanged in European trade early Thursday, as a degree of calm prevails following the signing of the Sino-U.S. trade deal.

At 03:25 ET (0825 GMT), the traded at $ 1.1155, up 0.1%, while stood at $ 1.3046, up 0.1%. The traded at 110.05 yen, up 0.1%. The , which tracks the greenback against a basket of developed market currencies, was down 0.1% at 96.910.

That signing of the much-anticipated phase one trade agreement between the U.S. and China should draw a line under 18 months of tit-for-tat tariff hikes that have hurt global growth.

The signing should result in a calmer market in 2020 from at least one point of view, although underlying tensions between the U.S. on the hand and Europe and China on the other still remain.

“The U.S.-China deal implies that the amount of uncertainty related to trade war declines significantly in the short-term,” according to a research note from Tuuli Koivu at Nordea. “We assume that after having achieved the phase one trade deal with China, Trump will not take huge risks when running for president at the November elections.”

Looking elsewhere, the South African central bank holds its latest rate setting meeting at 8:00 AM ET (13:00 GMT). The bank is widely expected to hold its key repo rate unchanged at 6.5%. That said, the last meeting in November showed a split between the members, with three of the five members voting to hold, while two favored a cut.

Turkey’s central bank also meets Thursday to decide on interest rates, having slashed borrowing costs in half from 24 percent in July. Thirteen of 21 economists surveyed by Reuters predicted another rate cut, with six expecting the bank to lower interest rates by 100 basis points to 11 percent. Some analysts argue that that would leave Turkish real interest rates too low, given that inflation has rebounded to nearly 12% in the last couple of months.

At 03:25 AM ET (08:25 GMT), the traded at 14.3906 rand, and the at 5.8887 lira.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Russian Billionaire Loses Lawsuit Against Nordic Banks

© Reuters.  Russian Billionaire Loses Lawsuit Against Nordic Banks © Reuters. Russian Billionaire Loses Lawsuit Against Nordic Banks

(Bloomberg) — A group of Nordic banks sued by a Russian oligarch aren’t required to accept his business, according to what may prove to be a landmark ruling by a court in Finland.

Russian billionaire Boris Rotenberg, an associate of President Vladimir Putin, lost his lawsuit against four Nordic banks and was ordered to pay more than 500,000 euros ($ 556,000) to cover their legal fees, the Helsinki District Court ruled on Monday.

The court said that forcing the banks to accept business from Rotenberg, who is on the U.S. sanctions list, would have subjected them to significant financial risk which they, by law, are prohibited from taking.

The lawsuit targeted Svenska Handelsbanken AB (ST:) for refusing to accept cross-border deposits from Rotenberg, and Nordea Bank Abp (SIX:), OP Group and Danske Bank A/S (CSE:) for not processing payments to vendors for basics including Rotenberg’s electricity bills.

Jakob Dedenroth Bernhoft, a Copenhagen-based lawyer who specializes in compliance and money laundering issues, said the decision would set an important precedent.

“All the other banks will look at this decision from the court for guidance on what to do in a similar situation,” Bernhoft said by phone before the verdict was delivered.

At stake was the banks’ access to the U.S. dollar market, which is crucial to their ability to operate.

The case comes against a backdrop of money-laundering scandals in the region, with regulators ratcheting up compliance requirements. Banks are also under increasing pressure to identify dodgy customers. According to documents provided to the court, Rotenberg has a current account at Handelsbanken, which the bank has supplied on the recommendation of the Finnish Financial Ombudsman Bureau.

Rotenberg had argued that his status as a dual citizen of both Russia and Finland meant that banks based in Europe must process his transactions. But the court said Rotenberg failed to prove he resides in a European Economic Area country, and thus has no such rights to basic banking services as mandated by law.

The court’s panel of judges ruled unanimously, but the verdict can be appealed. Rotenberg has seven days to express his dissatisfaction with the ruling, the court said.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Stock Market News

State banks help steady Turkish lira despite oil jump

By Nevzat Devranoglu

ANKARA (Reuters) – The Turkish lira was flat on Monday despite another jump in oil prices, and three traders said state banks were again selling dollars to support the currency through market turbulence after the U.S. killing of a top Iranian commander.

The lira was at 5.9735 against the dollar, little changed from Friday’s close at 5.9740.

It weakened 11% last year, in part due to Turkey’s military incursion in Syria and the threat of U.S. sanctions, bringing losses over the last two years to 36%.

“The state (banks) are in the market on the forex supply side today too, as they were on Friday,” one trader said. “It is difficult to say how many dollars are being sold but it’s clear they will not allow an excessive loss in the lira’s value.”

Since March of last year, traders have pointed to occasional state bank interventions to stabilize the lira.

The U.S. killing last week of Iranian commander Qassem Soleimani fueled geopolitical tensions and brought more selling pressure on both the lira and on oil, sending crude prices up another 2% on Monday and hurting emerging-market currencies.

Turkey relies on imports for almost all of its energy consumption including oil.

State banks have not spoken publicly about the interventions, though Turkey’s central bank has said they have been more active in markets this year conducting two-way transactions.

“We can say that there was support for the lira, particularly on Friday, in order to reduce the impact of geopolitical tension,” said a senior banker.

“When we look at state banks’ foreign exchange positions, we can see that in the last weeks of the year steps began to support the lira.”

The yield on the benchmark 10-year bond (), which has fallen from 21% in May, was steady at 12.4% on Monday.

The main BIST 100 share index (), which fell 1.94% on Friday, was down 1.4% on Monday.

Investors are also weighing up the outlook for Turkish monetary policy after data on Friday showed annual inflation rose slightly more than expected to 11.84% in December, narrowing the window for more rate cuts in 2020.

Encouraged by the government to cut aggressively to lift the economy out of recession, the central bank slashed its key policy rate to 12% by December from 24% in July.

Bankers said the Treasury could make a eurobond issue this week but such an issue, often made early in the year, could be delayed for several weeks due to the lessened global appetite.

The Treasury will begin switch auctions this week, holding three such auctions on Tuesday. It will buy back fixed-coupon, floating-rate and CPI-indexed securities maturing in 2020 and issue bonds maturing in 2027.

Investors who met Turkish authorities in September told Reuters they expected the Treasury to start issuing longer-term bonds after the sharp cuts in interest rates.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Forex News

Turkish State Banks Sell $1 Billion to Spare Lira From Rout

(Bloomberg) — Turkish state lenders sold between $ 1 billion and $ 1.5 billion to stem the lira’s decline on Friday, according to three people with knowledge of the matter.

The sales appear to have been triggered by a global flight from riskier assets as tensions between the U.S. and Iran escalated, two of the people said.

The lira slipped as much as 0.4% amid the rout to a seven-month low of 5.9781 against the dollar, posting one of the smallest declines across emerging-market currencies.

State banks have sold dollars to prop up the lira over the last year, especially in times of heightened volatility, traders say. The currency is a key economic barometer for voters and a driver of consumer confidence.

But the practice has been a source of controversy, with speculation mounting the sales amount to veiled intervention by the central bank. It’s also made trading the lira less attractive for foreign investors.

In the run-up to municipal elections in March, state banks sold as much as $ 15 billion to support the currency, according to traders’ estimates. In the second week of October, transactions amounted to at least $ 3.5 billion amid fears that punitive measures from Washington could deal a fresh blow to the Turkish economy.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Will Chinese banks fully pass on the shift in funding costs?

China now shifts to using the loan prime rate as its new lending benchmark, but will banks pass on the “cut” to consumers?

China
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Adam had the story on the shift in funding costs this weekend here. The loan prime rate (LPR) is about 20 bps lower than the previous lending benchmark at 4.35%, so essentially this is inadvertently a “rate cut” performed by the Chinese central bank.

However, as ever the case with banks, they will surely find reasons to not pass on this sort of cuts along to consumers and businesses. This was particularly evident with the case of Australian banks not fully passing on the RBA rate cuts earlier this year.

This is essentially a similar scenario where Chinese banks could argue that they are still following the LPR but are adding a ‘risk premium’ on top of that worth ~20 bps.

That will allow them to avoid making changes to their current margins but it essentially means less efficient monetary policy transmission in the big picture. Over time, if more easing is introduced, there is no doubt that banks will also lower their rates.

But a more efficient policy transmission system will certainly help to reduce the weight on central banks in trying to stimulate the economy.

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ECB takes oversight of big investment banks fleeing Brexit

FRANKFURT (Reuters) – The European Central Bank will start supervising the subsidiaries of several global investment banking giants from next year as they move significant operations to the continent ahead of Brexit, the ECB said on Wednesday.

“Owing to Brexit, four banks were expected to significantly increase their business activities and were therefore placed under the ECB’s direct supervision: UBS Europe SE, J.P. Morgan AG, Morgan Stanley (NYSE:) Europe Holding SE and Goldman Sachs (NYSE:) Bank Europe SE,” the ECB said in a statement.

All in all, the bank will supervise 117 lenders from next year, down from 119, as several banks no longer meet its criteria for supervision.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economy News

Argentines Pull Dollar Deposits From Banks Before Election

(Bloomberg) — Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Pocket Cast or iTunes.

“How much?”

That was the greeting that bank tellers gave to clients at one teller window on Friday morning in downtown Buenos Aires.

In the last day that Argentines had to pull dollar deposits or buy greenbacks with their devalued pesos, lines were visible outside several branches and the interiors quickly filled once the doors opened. One institution, conscious of the long wait, even laid out breakfast pastries, juice and Coca-Cola (NYSE:) for clients.

It doesn’t matter if you’re going to vote for incumbent Mauricio Macri or front-runner Alberto Fernandez. Everyone has one thing clear, the coming months will be volatile — even by Argentina standards — and rather than risk having your money trapped or converted into pesos, it’s better to keep it in a safe at home ahead of Sunday’s vote.

Even though Macri imposed capital controls at the beginning of September to stem a run on the currency, Argentines are still allowed to buy $ 10,000 a month. Purchases and withdrawals have multiplied this week. The central bank’s reserves have sunk $ 2.2 billion this week alone, and while part of that is to pay government debt and comes from large corporations, the retail transactions have surged.

Argentines had already yanked $ 11.8 billion — about 36.4% of the total — from accounts since the fateful Aug. 11 primary election through Monday. Savers are also draining pesos from time deposits and local funds in order to buy more greenbacks, with more than a quarter of money in peso-denominated mutual funds exiting this week alone.

It’s not just crowds at the banks and nervous pedestrians on the streets trying to hide wads of cash where the hysteria can be seen. While discussing the different exchanges rates, a local TV network played roaring flames in the background with burnt bills flying through the air on Friday morning.

The peso has sunk 37% this year alone, most of that before capital controls were implemented. A variety of informal exchange rates used both by investors and people in the streets as part of a black market, trade well above the 60 pesos per dollar official rate. Those rates reached a new low on Friday.

On a popular late night talk show with economists and analysts on Thursday evening, the debate centered on how to defuse the economic “bomb” after the election and whether policymakers and Fernandez’s incoming economic team should cut the green or the red wire.

With Fernandez expected to win Sunday, focus is more on his initial comments than on the results. The indications he gives during his speech Sunday and whether he quickly assigns an economic team to negotiate a transition will be key.

The central bank is already preparing a menu of options to clamp down more on dollar purchases to bridge the gap to the inauguration on Dec. 10, according to person with direct knowledge of the matter.

Whether it was the late 80’s or the early aughts, many have already seen severe economic crises cripple their savings and are wily financiers when it comes to knowing when to buy or sell dollars.

Back at the banks this morning, as clients were handed numbers and realized there were as many as 100 people in front of them, more than one remarked “this is craziness.”

(Adds exchange rate in eighth paragraph. An earlier version corrected the restrictions on dollar purchases.)

To contact Bloomberg News staff for this story: Daniel Cancel in Sao Paulo at dcancel@bloomberg.net

To contact the editor responsible for this story: Daniel Cancel at dcancel@bloomberg.net

©2019 Bloomberg L.P.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Narrow majority of Fed banks wanted to keep discount rate unchanged: minutes

WASHINGTON (Reuters) – Seven out of the 12 regional Federal Reserve banks wanted to leave unchanged the rate commercial banks are charged for emergency loans ahead of the U.S. central bank’s last policy meeting, minutes from the discussion of the discount rate showed on Tuesday.

Despite that, the Fed decided to lower the discount rate to 2.50% from 2.75% at its Sept. 17-18 meeting at the same time that it cut its benchmark overnight lending rate by a quarter of a percentage point to a target range of between 1.75% and 2.00%.

Directors of the Fed banks of Boston, New York, Philadelphia, Richmond, Cleveland, Atlanta and Kansas City all wished to maintain the existing discount rate, citing a “strong labor market and inflation near its symmetric 2% objective.”

The directors of the Fed banks of Minneapolis, Chicago, Dallas and San Francisco pushed for the quarter-percentage-point cut in the discount rate that was ultimately implemented.

The discord echoes the debate among U.S. central bank policymakers about how much slowing global growth and the fallout from the Trump administration’s trade wars are harming the U.S. economy.

Policymakers are split into those who think the Fed’s two interest rate cuts this year suffice for now to keep the longest economic expansion on record going, others who think the Fed should lower borrowing costs more, and some who see a rate rise by the end of the year, according to projections released last month.

St. Louis Fed President James Bullard called for a half-percentage-point cut at the Fed’s September policy meeting. Directors of the St. Louis Fed likewise wanted the discount rate cut to 2.25% ahead of the meeting, the minutes showed.

Investors currently expect another reduction in borrowing costs when the Fed’s rate-setting committee next meets at the end of this month.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Ghosts of 2002 ‘corralito’ spur Argentines to shun banks, stash cash at home

By Walter Bianchi

BUENOS AIRES (Reuters) – It happened in 1989. It happened in 2002. Argentines who are old enough to remember do not want to go through it again.

A run on the peso since the Aug. 11 primary election, which signaled that business-friendly President Mauricio Macri likely will not get re-elected, shocked Argentines who remember being blocked from withdrawing their money in past “corralitos,” a local term that means banks retain cash in “little corrals.”

There has been no sign of a new corralito. But in the past week, dollar deposits fell by $ 1.9 billion, or 6% of the $ 30.5 billion in total dollar deposits, according to central bank data on Friday. The impulse for depositors to grab cash while they can stems from a history of mistrust in the banking system.

Argentina’s market volatility following the primary vote sparked nightmares of the widespread panic during the corralito, when the government froze deposits of $ 40 billion and imposed caps on the withdrawal of cash from banks, from the end of 2001 through 2002.

Riots broke out. Irate depositors vandalized ATMs and supermarkets were looted. The 2001/02 deposits freeze punctuated an economic meltdown that tossed millions of middle-class Argentines into poverty.

GRAPHIC: Argentine deposits in dollars in private sector – https://fingfx.thomsonreuters.com/gfx/editorcharts/ARGENTINA-DEPOSITS/0H001QERX81P/eikon.png

Argentines had also lost control of their own money in 1989, when deposits were confiscated in exchange for government bonds after banks could not pay interest.

Last week, stock and bond prices plummeted and the peso weakened 18% after the landslide victory in the primary election by opposition candidate Alberto Fernandez and his running mate, former President Cristina Fernandez de Kirchner. Investors see the pair as a riskier prospect than Macri, due in part to the interventionist policies under Kirchner’s government, including heavy-handed currency controls.

“I prefer to have my savings at home. It’s my insurance for the next few years and I don’t want any doubts,” Stella, 70, told Reuters. Her last name is withheld to protect her privacy.

“We already have experience with ‘corralitos,'” she said.

Because the major political parties had already chosen their candidates, the Aug. 11 primary served as a giant opinion poll on the Oct. 27 presidential election. Fernandez surpassed the 45% vote margin needed to win in the first round of voting.

Whether the election is decided in October or in a November run-off vote, the next president will take office in December.

Private savings, measured as a percentage of gross domestic product in local currency, have decreased to 12% so far this year from 14% in 2016.

Foreign currency deposits have grown, however, to 8% of GDP so far this year, compared to 4% in 2016, according to a report by First Capital Group, signaling that Argentines are ditching their pesos for dollars.

Whether outflows continue will be based on market fluctuations, which were more stable in recent days, though volatility could return as the Oct. 27 election nears.

“If the days go by and the dollar remains relatively stable, the outflow of deposits will decrease,” said Christian Reos, research manager at Allaria Lesdesma.

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Video: Why central banks keep getting it wrong

Why central banks got it wrong last year

Central banks wildly overestimated the landscape in the global economy and markets. They can’t raise rates because consumers and businesses can’t survive in the world that central banks want to live in and they don’t understand how market psychology trumps their models.

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