Tag Archives: Exchange rate

In a Bank of England Financial Stability Paper, Olga Cielinska, Andreas Joseph, Ujwal Shreyas, John Tanner and Michalis Vasios analyze transactions on the Swiss Franc foreign exchange over-the-counter derivatives market around January 15, 2015, the day when the Swiss National Bank de-pegged the Swiss Franc. From the abstract: The removal of the floor led to extreme price moves in the forwards market, similar to those observed in the spot market, while trading in the Swiss franc options...

In the latest report from ADM ISI’s strategy team, “Dollar Liquidity Threat is Getting Critical and Fed is M.I.A.”, Paul Mylchreest argues that mainstream economic luminaries (like Carmen Reinhart) are finally acknowledging the evolving crisis due to the dollar shortage outside the US, a topic which even the head researcher at the BIS shone a spotlight on yesterday suggesting that the strength of the dollar, not the VIX...

In Die Volkswirtschaft, Ernst Baltensperger and Peter Kugler summarize the history of the Swiss Franc since the mid 19th century: After 1973, the Swiss Franc has been strong. Swiss Franc yields have been lower than what uncovered interest parity would suggest. Before 1914, the Swiss Franc was weak in the sense that it enjoyed only limited credibility. In periods with fixed exchange rates, Swiss Franc yields typically exceeded yields in French Franc or Sterling. Throughout the 20th...

The blockchain technology opens up new possibilities for financial market participants. It allows to get rid of middle men and thus, to save cost, speed up clearing and settlement (possibly lowering capital requirements), protect privacy, avoid operational risks and improve the bargaining position of customers. Internet based technologies have rendered it cheap to collect information and to network. This lies at the foundation of business models in the “sharing economy.” It also lets...

Adjusted for GDP, The Economist’s Big Mac Index suggests that the Swiss Franc is 9 percent over valued relative to the US Dollar while the Euro is 17 percent under valued.

SRF, Tagesgespräch, June 16, 2016. HTML with link to MP3. Half-hour-long interview on the Swiss news channel. Topics include monetary policy, exchange rates, financial stability, Brexit.

In a speech, Hyun Song Shin points out that CIP increasingly fails to hold: the Dollar interest rate implied by FX swaps vis-a-vis the Euro, Yen, Pound or Swiss Franc is “too high.” Moreover, the deviation is negatively correlated with the Dollar’s spot exchange rate: When the Dollar appreciates, the deviation from CIP widens. Shin argues that bank behavior explains the deviation: … the US dollar is used widely throughout the global banking system, even when neither the lender nor the...

Finanz und Wirtschaft, April 30, 2016. PDF. Ökonomenstimme, May 6, 2016. HTML. The winners and losers of the current monetary environment are not that easy to identify. Investors holding long-term, non-indexed debt gain as unexpectedly low inflation shifts wealth from borrowers to lenders. Governments suffer from increased real debt burdens and reduced revenue due to effectively lower capital income tax rates. Policies that succeed in affecting the real exchange rate entail...

Rising. Source: SNB. The series “in EUR” is based on the author’s calculations. Note: The exchange rate floor vis-a-vis the Euro was in place from 6 September 2011 until 15 January 2015.

In a Study Center Gerzensee working paper, Pinar Yesin argues that the IMF’s Equilibrium Real Exchange Rate model (ERER) helps predict medium term exchange rate changes. The reduced form equation relates the real effective exchange rate to macroeconomic fundamentals. … one of the models, namely the ERER model, outperforms not only the other two in predicting future exchange rate movements, but also the (average) IMF assessment. … the IMF assessments are better at predicting future exchange...