Tag Archives: newsletter

(from my colleague Dr. Win Thin) China press is reporting that policymakers are drafting rules for a so-called Tobin tax on yuan transactions Former President Lula was named to the cabinet post of Chief of Staff by his protégé, President Rousseff The Brazilian central bank said it “sees room” to partially unwind the FX swaps program Egypt devalued the pound by almost 13% and said it would adopt a “more flexible exchange rate” The National Executive Committee of the ruling African...

In our work, we have argued that the dollar is having its third significant rally since the end of Bretton Woods.   The first rally was associated with Reagan though it began under Carter and followed 100 bp hike by a new Federal Reserve Chairman (Volcker).   On a real broad trade-weighted basis, the dollar appreciated by more than 50% over the seven years and in 1985, the G7 met at the Plaza Hotel in NY and agreed to coordinate intervention to drive the dollar down.     Before last...

The US dollar is firmer against most major and emerging market currencies to pare this week's decline.  There are three notable exceptions, and they are all in Asia.  For all practical purposes, the dollar is flat against the Japanese yen near JPY11.30.   The South Korean won is up almost 1% to extend this week's pace-setting the gain to 2.65%.  The dollar has fallen 7.2% against the won since it peaked at the end of last month.  The Taiwanese dollar is 0.6% higher, which essentially...

We examine the SNB monetary assessment statement of March 17 and the Swiss economy. We explain why negative rates may be a “toothless measure” if a central bank wants to weaken a currency. They have rather an inexpected consequence, they slow down GDP growth, in particular for banks and pension funds. The following are the extracts from the monetary policy assessment of Swiss National Bank,  17 March 2016, and my comments.All SNB statements appear in quotes, my comments without quotes....

If there was one word Yellen emphasized yesterday it was caution.  The dot plot reflected that as well.  Can one ask if the Fed is being too cautious?    Yellen acknowledged that the Fed's assessment of the US economy had not changed much from December.  There is little reason it should.  However, it is difficult to reconcile that with the substantial change in the forward guidance, and the halving of the rates hikes that are deemed appropriate this year.  The US labor market continues to...

The cry that the dollar has peaked is gaining ground.  We are not convinced.  The macro-fundamental case remains intact.  Divergence between the US and other high income countries continues, even if at a more gradual pace than the Federal Reserve expected a few months ago.  This Great Graphic of the Dollar Index, created on Bloomberg, shows that shows the broad consolidation over the past year continues to hold.  The break of 95.00 today seems to point to a test on the low from last...

The Federal Reserve's cautiousness has sent the dollar reeling.  The Fed's backtracking to two hikes this year from four is still met with skepticism by the market.  It previously had a June hike nearly discounted but has not pushed that out until September.   With a backdrop of  BOJ, and ECB and PBOC easing policy, and the Federal Reserve reducing the number of hikes it anticipates, the recovery from the turbulent start to the year continues.   Although the Nikkei slipped, the MSCI...

Yesterday when summarizing the Fed's action we said that in its latest dovish announcement which has sent the USD to a five month low, the Fed clearly sided with China which desperately wants a weaker dollar to which it is pegged (reflected promptly in the Yuan's stronger fixing overnight) at the expense of Europe and Japan, both of which want the USD much stronger. ECB, BOJ don't want a weak dollar; China does not want a strong dollarFed sides with China for now — zerohedge (@zerohedge)...

17.03.2016 09:15  - FSO, Prices (0353-1602-50) Producer and Import Price Index in February 2016 0.6% decline in Producer and Import Price Index Neuchâtel, 17.03.2016 (FSO) – The Producer and Import Price Index fell in February 2016 by 0.6% compared with the previous month, reaching 99.0 points (base December 2015 = 100). Whereas the Producer Price Index declined by 0.5%, the Import Price Index fell by 1.0%. The decline is due mainly to lower prices for chemical and pharmaceutical products...

  Producer and Import Price Index in February 2016 0.6% decline in Producer and Import Price Index Neuchâtel, 17.03.2016 (FSO) – The Producer and Import Price Index fell in February 2016 by 0.6% compared with the previous month, reaching 99.0 points (base December 2015 = 100). Whereas the Producer Price Index declined by 0.5%, the Import Price Index fell by 1.0%. The decline is due mainly to lower prices for chemical and pharmaceutical products as well as petroleum products. Compared with...