It's not just a crude scramble for recovery that's making currencies central. The steady shift in capital flows towards emerging nations and a reshaping of the global economy to prevent a repeat of the crisis are as key.
There are drawbacks to most professions. For those who make a living from the $4 trillion (£2.5 trillion) global foreign-exchange market, the weekend's annual meeting of the World Bank and the International Monetary Fund will have been a reminder of theirs: the need to decipher the often elliptical prognostications of finance ministers, central bankers and assorted policy wonks.
A market used to analysing inflation, current accounts and comparative bond yields has spent the past fortnight digesting the increasing talk of a global currency war. The IMF's communqiué made a veiled reference to the rising tensions, saying nations must "detract from policy actions" that would dent a global recovery.
Those in the markets are unsurprised that currencies appear to be taking centre stage three years after the financial crisis erupted. Governments have, after all, already yanked very hard on the monetary and fiscal levers to try to ignite growth, particularly in the US, Britain and Europe. "Policymakers will keep debating the use of the exchange rates to maintain growth," said Mansoor Mohi Uddin, who runs currency strategy at UBS, the second-biggest bank in the market.
But it's not just a crude scramble for recovery that's making currencies central, experts say. The steady shift in capital flows towards emerging nations such as Brazil and a reshaping of the global economy to prevent a repeat of the crisis are as key. Both US President Barack Obama and the Coalition in Britain have pledged to put exports at the heart of economies that became too reliant on their own indebted consumers. At the same time, capital flows into fast-growing emerging economies are rising, putting upward pressure on their currencies. The Institute for International Finance, for example, forecasts that capital flows into emerging economies will jump to $825bn this year from $581bn in 2009.
So, inevitably, the mood has darkened. In the US, the House of Representatives this month passed a bill that would allow tariffs to be imposed on Chinese imports into America. But currency investors are as sceptical of a war breaking out this week.
What traders on dealing floors in London - the heart of the foreign-exchange market - are braced for are more central banks trying intervention on their own, and much higher volatility. "It's guerrilla warfare," said Thanos Papasavvas, head of currencies at Investec Asset Management. "The market will be having to listen to what the Bank of Japan says, then the Chinese, then the US."
The Bank of Japan shocked markets in September by intervening for the first time since 2004, as it spent 2.1 trillion yen (£16bn) trying to halt the currency's surge against the dollar. But it was only joining the South Koreans and the Israelis, who have already sought to weaken the won and the shekel against the dollar this year.
With many now expecting the greenback to slide further as the Federal Reserve embarks on another round of quantitative easing, investors say there is a real risk of tensions escalating.
Over the weekend, George Soros, perhaps the world's best-known currency trader, joined the chorus predicting a battle. Papasavvas of Investec says the European Central Bank president, Jean-Claude Trichet, will be alarmed if the euro, already at an eight-month high of $1.39, moves much closer to $1.50.
Though currency traders may have had to spend the weekend unpicking the International Monetary Fund's communique, the savvy ones could prove the winners as tensions mount.
#1
That would seem more a feature than a bug to a Chinese communist likely still stunned at the fact that the stupid capitalists have already voluntarily surrendered so much of the world's means of production. Heck this outcome might even be inevitible if the true believers still run that place.
#2
Whenever Soros talks about currency expect manipulation positions are already taken to cash in on the publicity. What a truly evil man and what wreckage he has wrought with his billions as he enriched himself.
#3
Dear NoMoreBS and AzCat I am American and this is a discussion about foreign currencies. Your insights into comunism or evil errmmm - fascinating - and maybe we could discuss them a little later when you have finished with the rubber cutlery?
For the time being, however, they are wholly irrelevant and you, my friend, appear to be out of your tree
#4
Soros is the right's bete noir much as Scaife was the left's. Sure, they are not comparable in many respects except their ability to make otherwise (somewhat) reasonable people hear monsters under the bed...
Posted by: M. Murcek ||
10/10/2010 21:25 Comments ||
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#5
Dear Hunterkiller (and Murcek). When Soros is involved, it is not just about currencies. He bankrolls most of the leftist outlet out there, through his Tides "foundation". He also bankrolled the beginning of AGW scam, together with Maurice Strong.
I am not sure who was behind the crash on Sept. 19, 2008, but the first thing that popped into my mind was Soros, that scoundrel.
His AGW project seems to be in shambles (despite 10:10 and other such ventures), so he is probably looking into something else, akin Sept. 19, 2008. Not to influence this election, he is long term planner.
If he repeats the "China warning" several times through next several months, you can bet that he is trying to introduce meme, to deflect any purview of his doings.
#1
Mr. Faisal your menu for today and the rest of your life:
Breakfast: Bacon and Eggs (Oops, we had a egg contamination, no eggs for the foreseeable future)
Lunch: BTL
Dinner: Pork Chops
Have a nice day,
Meachem Rosenthal
Warden
Posted by: Jack Salami ||
10/10/2010 9:16 Comments ||
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#2
"...Consider me only a first droplet of the flood that will follow."
Flood? I guess we will have to drain the swamp. At some point, I suspect, Americans will declare their own jihad once the political Quisling class in Washington is thrown out.
#7
I think the most appropriate word is nuke ARCLIGHT, but that's just me...
Posted by: Old Patriot ||
10/10/2010 17:08 Comments ||
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#8
#3 The word for retaliating against islamic aggression is to Crusade.
It's really going to suck for you when you have to bow your ass to a glass wasteland if your religion doesn't stop the barbaric jerkassery and bring itself into the civilized 21st century.
#10
That is sooooooo 20th Century. Next years 'flu panic' could simply be a front for the vaccine to a designer plague that could take down most of world which fears polio shots. No rad, no glass, resources undisturbed.
Pakistan - Millions for nuclear weapons; not one cent for flood abatement.
The Institute for Science and International Security, a Washington-based nuclear watchdog, has obtained satellite images showing that a row of cooling towers at Pakistan's secret Khushab-III reactor has been completed. This suggests the plant could begin operation within months, allowing Pakistan substantially to increase its stockpiles of weapons-grade plutonium.
Last year, Barack Obama, US president, called for "a new treaty that verifiably ends the production of fissile materials". In response, the Conference on Disarmament, a 64-nation coalition that negotiated the 1992 Chemical Weapons convention and the 1996 Comprehensive Nuclear Test Ban Treaty, agreed to negotiate a Fissile Materials Cut-off Treaty, intended to cap production of weapons-grade enriched uranium and most forms of plutonium.
But Pakistan, which is deepening its nuclear ties to China, has blocked the Conference on Disarmament from starting discussions, saying a cut-off would hurt its national security interests. Ashley Tellis, a scholar at the Carnegie Endowment for International Peace, said: "Pakistan thinks its going to be forced to cap its fissile material stocks and wants to make sure it has as much as it can get before then." The country's position has frustrated many states. Rose Gottmeiler, the US Assistant Secretary of State for Arms Control, recently warned that her country's "patience is running out".
Khushab-III is the latest in a series of reactors built to feed Pakistan's nuclear weapons programme. Khushab-II, located next to its new sister plant, became operational in February. The plutonium produced at the complex allows for the construction of small but lethal weapons: a single kilogram can produce an explosion equal to 20,000 tons of conventional explosives.
Work at Khushab III has forged ahead even as Pakistan struggles to cope with floods that have inflicted damage estimated at £27 billionand amid mounting concerns over the long-term security of the strife-devastated country's nuclear arsenal.
Pakistan argues that its nuclear weapons programme is necessary to counter the superior conventional forces of India, its historic adversary. In a recent report published by the prestigious Bulletin of Atomic Scientists, Hans Kristensen and Robert Norris estimated it had assembled 70-90 nuclear warheads to India's 60-80, and had produced enough fissile material to manufacture another 90 more.
The Obama administration is also disturbed by Chinese plans to build two new nuclear reactors in Pakistan, bypassing Nuclear Suppliers Group (NSG) rules that bar sales of nuclear equipment to states that have not signed the Nuclear Non-Proliferation Treaty (NPT). India, which along with Israel and Pakistan has refused to sign the NPT, recently obtained a waiver from the NSG allowing sales under international safeguards.
China, however, says it does not need NSG permission to sell reactors to Pakistan, arguing it had committed to the deal before it joined the NSG in 2004a claim the United States disputes.
The Great Game continues, just with different players ...
New Delhi's defence establishment has quietly put in place India's own counter-measures to woo and bolster China's neighbours as a long-term strategy, says Nitin Gokhale
One of the least understood and less scrutinised facets of India's diplomacy is perhaps New Delhi's 'Look East' policy, now nearly two decades old. Launched during Prime Minister P V Narasimha Rao's regime primarily to try and integrate India's newly liberalising economy with that of the Asian 'tigers', that policy is now quietly evolving into a more robust military-to-military partnership with important nations in that region.
Over the past three months alone, top Indian military leadership has made important trips to key nations in South-East and East Asia -- Vietnam, South Korea, Japan, Philippines, Indonesia, Thailand and Singapore.
That and a developing, informal defense relationship with the US is the only real counter the Indians have.
Yup, we should indeed move closer and closer to the Indians. That would help security in the whole of Asia and help stymie the Chinese. It would also be just the right thing to do.
Posted by: Steve White ||
10/10/2010 11:45 Comments ||
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#4
So, to balance it all out, we should hire more Indians who can steal our secrets to make up for hiring all the Chinese who already have?
A multi-volume chronology and reference guide set detailing three years of the Mexican Drug War between 2010 and 2012.
Rantburg.com and borderlandbeat.com correspondent and author Chris Covert presents his first non-fiction work detailing
the drug and gang related violence in Mexico.
Chris gives us Mexican press dispatches of drug and gang war violence
over three years, presented in a multi volume set intended to chronicle the death, violence and mayhem which has
dominated Mexico for six years.
Rantburg was assembled from recycled algorithms in the United States of America. No
trees were destroyed in the production of this weblog. We did hurt some, though. Sorry.
Abdulmutallab case highlights the cowardice of those who should be confronting extremism
