MyBroadband’s Post

I have a new post out on my substack, returning to the theme of foreign exchange markets and global imbalances. In this post, I note that when an inflation-targeting central bank makes interest rate moves designed to restore an economy to internal balance, the reaction of foreign exchange markets typically takes that economy further away from external balance. This can have negative consequences for medium-term financial stability due to perceived incentives in the tradeable vs. non-tradeable sectoral balance of investment, and even worse, toxic consequences for the politics of trade. Consequently, there may be a case for coordinated intervention in foreign exchange markets under such circumstances. I hope you find it of interest. https://lnkd.in/gHwwi5Us

With the foreign exchange shortage plaguing T&T for over a decade, one economist has suggested that a more permanent fix to the structural problems of the market is to reduce import intensity and speed up efforts at diversification, particularly in the tradeable sector. The Sunday Business Guardian took a closer look at what continues to be a major problem for business owners and the public in accessing any amount of US currency. Economist Dr Dave Seerattan identified the twin challenges of relatively low levels of economic diversification and few net foreign exchange-earning sectors, which predispose the economy to an imbalance in the foreign market where demand almost always exceeds supply. He said this is accentuated by high-risk aversion among market agents, which manifests itself in a tendency to hoard forex even when their transaction demand is satisfied. “Therefore, availability and cost are a key policy issue in small open economies. The primacy of this policy issue is also driven by the fact that what happens in the forex market in terms of price and liquidity has serious implications for the cost of living and poverty, equity (including intergenerational equity), and international competitiveness,” Seerattan detailed. Read More: https://lnkd.in/eDPamXyY

Despite the clear economic benefits, traders remain reluctant to adopt local currencies for international transactions, citing concerns over currency stability and market volatility. #LocalCurrencies #TradeFinance #EconomicGrowth https://ow.ly/kMbX50S1x53

The USD remains the most dominant currency in global trade finance and forex reserves. But geopolitical tensions and rising trade fragmentation are driving the slow but steady ascent of China’s renminbi. In a geopolitical landscape of rising bifurcation, money talks – and it is telling a story of two worlds drifting ever farther apart. #geopolitcs #geoeconomics #dedollarization #commodities #commoditytrading #macro #dollar #macroeconomics

De-dollarization, the process of reducing the reliance on the US dollar in international trade and finance, could have a significant impact on global trade. Here's a breakdown of the potential effects: Positive Impacts: *𝙍𝙚𝙙𝙪𝙘𝙚𝙙 𝘿𝙚𝙥𝙚𝙣𝙙𝙚𝙣𝙘𝙚 𝙤𝙣 𝙩𝙝𝙚 𝙐𝙎*can reduce their reliance on the US and its economic policies, potentially leading to greater economic independence. * 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗧𝗿𝗮𝗱𝗲 𝘄𝗶𝘁𝗵 𝗡𝗼𝗻-𝗗𝗼𝗹𝗹𝗮𝗿 Countries: De-dollarization could facilitate trade with countries that prefer to use their own currencies or other currencies, potentially opening up new markets. * 𝗥𝗲𝗱𝘂𝗰𝗲𝗱 𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻 𝗖𝗼𝘀𝘁𝘀: By eliminating the need for currency conversions, de-dollarization could lower transaction costs for businesses and consumers. * 𝗠𝗼𝗿𝗲 𝗗𝗶𝘃𝗲𝗿𝘀𝗲 𝗚𝗹𝗼𝗯𝗮𝗹 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗮𝗹 𝗦𝘆𝘀𝘁𝗲𝗺: A less dollar-centric system could lead to a more diverse and resilient global financial system. 𝙉𝙚𝙜𝙖𝙩𝙞𝙫𝙚 𝙄𝙢𝙥𝙖𝙘𝙩𝙨 : * 𝗜𝗻𝗰𝗿𝗲𝗮𝘀𝗲𝗱 𝗩𝗼𝗹𝗮𝘁𝗶𝗹𝗶𝘁𝘆: The transition to a less dollar-dominated system could lead to increased currency volatility and uncertainty in the short term. * 𝗖𝗵𝗮𝗹𝗹𝗲𝗻𝗴𝗲𝘀 𝗳𝗼𝗿 𝗱𝗲𝘃𝗲𝗹𝗼𝗽𝗶𝗻𝗴 𝗰𝗼𝘂𝗻𝘁𝗿𝗶𝗲𝘀 : Developing countries that heavily rely on the US dollar for trade and finance may face challenges in adapting to a new system. * 𝗗𝗶𝘀𝘁𝗿𝘂𝗽𝘁𝗶𝗼𝗻𝗻 𝗼𝗳 𝗲𝘀𝘁𝗮𝗯𝗹𝗶𝘀𝗵 𝘀𝘆𝘀𝘁𝗲𝗺: De-dollarization could disrupt existing trade and financial systems that are built around the US dollar. * Geopolitical Tensions: The process of de-dollarization could exacerbate geopolitical tensions between the US and other countries. Overall, the impact of de-dollarization on international trade is complex and uncertain. While it could offer some benefits, it also poses significant challenges that need to be carefully considered. The extent of the impact will depend on the pace and nature of the transition, as well as the ability of countries to adapt to a new global financial system. It's important to note that de-dollarization is a gradual process, and it is unlikely that the US dollar will be completely replaced anytime soon. However, even a partial shift away from the dollar could have significant implications for international trade and finance. #internationaltrade #ib #globaltrade #usa #dollar #currency #trade

China's forex and CFDs market is advanced, contrary to common assumptions of it being new. Traders are sophisticated, with high deposit averages similar to Europe. Despite the lack of local regulation, there's significant interest. Localization is crucial for success amid challenges like payment facilitation and marketing. #Forex, #Trading, #Cfd, #MultiBank

Delving into the significant economic shifts triggered by the reversal of the Yen carry trade. We explore how borrowing in low-yielding currencies like the Japanese Yen and investing in high-yielding assets like US tech stocks has impacted global markets over the past decade. Learn about the implications of the Japanese Central Bank's interest rate hike after 17 years, the resultant market reactions, and the broader economic effects, including geopolitical tensions and US fiscal policies. For course details: https://lnkd.in/gHxemtbx https://lnkd.in/gmy9kqcs Whatsapp: +91 9674006544 / 7595053300 #YenCarryTrade #CFA #FRM #CA #InterestRateParity #GlobalMarkets #InvestmentStrategies #USFiscalPolicy #GeopoliticalTensions #SectorRotation #TacticalAssetAllocation

Lucrative foreign exchange trade sustained by low volatility An unusual calm enveloping foreign exchange markets is extending the life of a lucrative trade beyond what many had expected. The so-called carry trade, which involves borrowing in a low interest-rate currency to invest in a higher-yielding currency, had been expected to fade as major central banks pivot away from hiking rates toward easing policy. However, a major shift has yet to happen, keeping currency markets calm and the trade, which relies on such stability, an easy winner. "The carry trade is often known as picking up nickels in front of steam rollers, but speculators have been picking up bundles of $100 bills over the last year," said Karl Schamotta, chief market strategist at payments company Corpay. "The returns are outstripping virtually everything else." The strategy provided bumper returns for those who played it right, a Corpay Global Payments analysis showed. Buyers of the high-yielding Mexican peso who sold the Japanese yen would have reaped gains of about 44% over the last 12 months. Other popular carry currencies have also yielded similarly outsized returns. A Deutsche Bank index, with elements that include the carry performance of 21 emerging market currencies, rose 6.6% in 2023, its best year since 2017. The DB EM FC Equally Weighted Total Return index, as it is called, has climbed nearly 1% over the last month.

So, while the US dollar network is vast and deep enough to remain the primary conduit for global trade, the dollar’s status is not guaranteed. The United States’ growing protectionism, its political dysfunction which bleeds into economic policy and institutional integrity, along with overuse of sanctions, all provide incentives for countries to consider an alternate trading system in another currency.

Discover how currency stability and power shape global trade, investments, and business interactions. Stay informed and inspired by the financial giants leading the international money market. . https://lnkd.in/gdyTCNSS . . . #guide #business #currencies #businessoutreach #investments