Sri Lanka, Pakistan discuss cross-investing forex reserves in government bonds: Minister - EconomyNext
Sri Lanka, Pakistan discuss cross-investing forex reserves in government bonds: Minister - EconomyNext |
- Sri Lanka, Pakistan discuss cross-investing forex reserves in government bonds: Minister - EconomyNext
- FOREX-Dollar firms on sudden spike in U.S. Treasury yields - Investing.com India
- Dollar Gains as Inflation Fears Push Yields Higher By Investing.com - Investing.com
- Why Online Forex Trading is risky for most Retail Investors - The Citizen
| Posted: 25 Feb 2021 05:29 AM PST  Thursday February 25, 2021 18:46 ECONOMYNEXT – Sri Lanka and Pakistan had discussed the possibility of cross-investing foreign reserves in each others' sovereign bonds during a visit of Prime Minister Imran Khan to the island, State Minister for Money and Capital Markets, Nivard Cabraal said. "We have been investing foreign reserves in Western government bonds at low rates about 1.5 percent," Cabraal told reporters in Colombo. "They are also investing in various instruments in the Western world. They are also generating 1.5 percent, just like us. Sometimes it makes sense to invest in theirs (bonds) and for them to invest in ours. ""But we borrow at high rates. When we give money to Western nations it is not called giving a loan but an investment." There was "merit" in investing forex reserves in each other's dollar sovereign bonds up to a prudential limit, he said. "Bangladesh central bank I know has Sri Lankan bonds," he said. "We should look at South-South investment." Over the last two decades Bangladesh has had superior monetary policy running a fairly credible implicitly pegged regime, analysts say. Many emerging market central banks which have explicit or implicit pegs countries which use the dollar as the intervention currency, also invest in Euro denominated bonds, which exposes them to high cross currency risks. Investing in dollar bonds reduces currency risk, though default and liquidity risks may exist in low rated emerging market bonds. Most South Asian governments have issued international sovereign bonds which are traded in key over the counter markets in Asia, Europe and the US. Advertisement Pegged central banks invest in Western government bonds because they have a high rating with low default risk and Western markets are liquid and they do not impose exchange controls. Before 1951 when a money printing Latin America style central bank was set up by a Federal Reserve money doctor Sri Lanka had a currency board where money was created only through forex purchases (net foreign assets) keeping the exchange rate fixed from 1885 to 1951. Its assets were invested in a number of liquid Sterling Area government securities and not just UK analysts familiar with the operations of the Board of Commissioners of Currency of Ceylon said. Issuing domestic money only against NFA provided a non-discretionary monetary rule that allowed Sri Lanka (Ceylon) to be among highest income countries in Asia after Japan and its stock exchange to finance FDI in countries like Malaysia. Currency Boards are not expected to have more than 115 or 120 percent of the monetary base in forex reserves and was a tool devised by British rulers to allow unit of their empire to get part of the profits of note issue. But Latin America style pegs try to collect large reserves to run counter-cycle policy and trigger balance of payments crisis in the process of selling reserves and sterilizing interventions to resist market interest rates in the economy in pro-cyclical policy or by printing money for budgets. After printing large volumes of money in 2020 (issuing money against domestic assets) Sri Lanka suffered its biggest balance of payments deficit in its history. (Colombo/Feb25/2021)  |
| FOREX-Dollar firms on sudden spike in U.S. Treasury yields - Investing.com India Posted: 25 Feb 2021 11:49 AM PST  * U.S. dollar firms after hitting seven-week low * 10-year U.S. Treasury yield pops to 1.6% * Graphic: World FX rates https://tmsnrt.rs/2RBWI5E (Updates prices, adds byline) By Karen Brettell and David Henry NEW YORK, Feb 25 (Reuters) - The lifted off a seven-week low on Thursday after yields on 10-year U.S. Treasuries jumped as high as 1.6% following weaker than expected bids in a U.S. government debt auction. The move was the latest example of currency markets taking their cue from bonds, which have been moving on the changing outlook for economic growth and inflation following unprecedented government stimulus and monetary easing along with increasing COVID-19 vaccinations. The dollar was up 0.13% against a basket of currencies =USD in the early New York afternoon after dipping as much as 0.26% to 89.677, its lowest since Jan. 8. The 10-year Treasury yield was 1.50%, still up 11 basis points on the day. The rise in bond yields, after adjusting for inflation, has accelerated in recent days, indicating a growing belief that central banks may begin to pare back ultra-loose policies, even as officials maintain a dovish rhetoric. "It has been a global move," said Vassili Serebriakov, an FX strategist at UBS in New York. "Those higher bond yields are a symptom of expectations of a strong economic rebound after the pandemic." Data on Thursday showed that fewer Americans filed new claims for unemployment benefits last week amid falling COVID-19 infections. Reserve Chair Jerome Powell reiterated on Wednesday that the U.S. central bank would not tighten its policy until the economy improves. currencies, including the Australian, New Zealand and Canadian dollars, all hit three-year highs earlier in the day as their bond yields surged. "The U.S. has actually lagged a lot of these other countries in terms of the yield moves," said Erik Nelson, a macro strategist at Wells Fargo (NYSE: ) in New York, noting that New Zealand's 10-year government bond yield had gained 18 basis points on Thursday. The AUD=D3 reached $0.8007 against the greenback and was last down 1% at $0.7882. New Zealand's hit $0.7463 and then fell, last off 0.8% for the day. The Canadian dollar CAD=D3 got as far as 1.2468 per U.S. dollar, but was last at $1.2569. The euro rose to a three-week high, gaining 0.5% before backing off. It was last up 0.04% at $1.2175. The safe-haven Japanese yen, which tends to underperform when global growth improves, weakened as far as 106.29 yen per dollar. JPY=D3 "Some of the currencies that typically don't do well in a global rebound are lagging," Serebriakov said. Changes in the dollar have been different against different currencies recently. "It's not just across the board the way it was last year when everything was driven by U.S. real yields falling and selling dollars across the board." ======================================================== Currency bid prices at 1:43PM (1843 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Dollar index =USD 90.1470 90.0450 +0.13% 0.184% +90.2650 +89.6770 Euro/Dollar EUR=EBS $1.2175 $1.2170 +0.04% -0.36% +$1.2244 +$1.2140 Dollar/Yen JPY=D3 106.0450 105.8600 +0.16% +2.65% +106.3950 +105.8800 Euro/Yen EURJPY= 129.10 128.79 +0.24% +1.72% +129.9700 +128.7900 Dollar/Swiss CHF=EBS 0.9052 0.9065 -0.14% +2.32% +0.9081 +0.9029 Sterling/Dollar GBP=D3 $1.4020 $1.4143 -0.84% +2.65% +$1.4182 +$1.4001 Dollar/Canadian CAD=D3 1.2569 1.2515 +0.45% -1.28% +1.2590 +1.2468 Aussie/Dollar AUD=D3 $0.7882 $0.7968 -1.08% +2.46% +$0.8007 +$0.7874 Euro/Swiss EURCHF= 1.1021 1.1029 -0.07% +1.98% +1.1097 +1.1015 Euro/Sterling EURGBP= 0.8681 0.8604 +0.89% -2.86% +0.8697 +0.8597 NZ NZD=D3 $0.7379 $0.7443 -0.85% +2.77% +$0.7464 +$0.7370 Dollar/Dollar Dollar/Norway NOK=D3 8.4895 8.3720 +1.53% -1.01% +8.5055 +8.3200 Euro/Norway EURNOK= 10.3370 10.1916 +1.43% -1.23% +10.3520 +10.1759 Dollar/Sweden 8.2830 8.2747 +0.21% +1.06% +8.2998 +8.2067 Euro/Sweden EURSEK= 10.0850 10.0642 +0.21% +0.09% +10.0964 +10.0410 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ World FX rates https://tmsnrt.rs/2RBWI5E ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>  |
| Dollar Gains as Inflation Fears Push Yields Higher By Investing.com - Investing.com Posted: 26 Feb 2021 12:07 AM PST  © ReutersBy Peter Nurse Investing.com - The dollar climbed higher in early European trading Friday, lifted by a sharp rise in U.S. Treasury yields, while riskier currencies were hit hard amid fears central banks will have to tighten sooner than previously expected. At 3:55 AM ET (0755 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, was up 0.4% at 90.468, also higher for the week and only 0.2% lower this month. fell 0.3% to 1.2137, after touching a seven-week high Thursday, fell 0.6% to 1.3933, was down 0.1% at 106.07, after earlier touching 106.43 for the first time since September. The risk-sensitive fell 0.6% to 0.7823, after earlier trading near a three-year high, dropped 0.5% to 0.7338 after reaching 0.7463 Thursday, a level not seen since August 2017, while climbed 0.3% to 1.2632. Government bonds, and particularly U.S. Treasuries, have started to become the focal point of markets globally, as traders now expect inflation to rise aggressively as economies recover on the back of extreme levels of fiscal stimulus and very loose monetary policies. As such, the fact that a Treasury auction on Thursday drew the weakest ratio ever of bids relative to the intended sale volume was the catalyst for a broad collapse in risk sentiment across markets. The yield on the benchmark 10-year U.S. Treasury note briefly crossed the 1.6% level to trade at its highest level in more than a year. While central bank rhetoric has remained very dovish - notably the testimony this week from Federal Reserve Chairman Jerome Powell, the rise in bond yields has indicated a growing belief that monetary policies will have to be tightened more quickly than originally envisioned. "Risks are tilted towards a faster rise in yields. History has shown us that exiting from very easy central bank policies can be tricky," said analysts at Nordea, in a research note. "While Powell has for now promised that sizable bond purchases will continue, the time to start to tweak that communication may not be that far into the future." The bank says the dollar is at risk of wrong-footing the consensus once more, strengthening rather than weakening in 2021, and lowers its year-end forecast for EUR/USD to 1.16. Currencies favored for leveraged carry trades all suffered, and in Europe rose 0.3% to 7.3561. 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.  |
| Why Online Forex Trading is risky for most Retail Investors - The Citizen Posted: 25 Feb 2021 11:31 PM PST  Retail forex trading, a small segment of global currency market that makes up individual investors has been steadily growing over the last 25 years. The growth in retail FX has been attributed to advent of internet and cheaper online forex trading platforms in late 90s. Since then, retail forex trading has picked up in whole world including Africa. Last year, despite the COVID-19 pandemic woes, the online forex trading in Africa registered a tremendous y-o-y growth. According to the latest statistics and report published by Trade Forex Kenya there has been on an average approx. 82% growth of retail forex trading volume in Africa in 2020 alone. There are now 1.5 million retail forex traders in Africa. The growing retail interest can be explained in four points: small capital requirement, ease of access to global markets via internet, 24X5 availability and low barriers to entry. Despite its growth, the online forex trading industry has only been regulated in 2 countries in Africa with over 70+ regulated entities in Kenya & South Africa combined, while many unregulated forex brokers are also working in the continent adding to the already inherent risk that the nature of business carries. Retail investors buy a currency pair and expect it to rise in the future so they can earn a profit. Those who have traded in shares would find it very much similar. Nevertheless, forex trading is quite risky in comparison to stock trading. Forex Trading online does not come without its risks, and scams. Here are some characteristics of forex trading that makes it risky: 1. Most investors lose money One of the most attractive features of the money market is 'leverage'. Retail Forex is offered as a leveraged CFD instrument by retail brokers, it is common practice in Africa for brokers to offer leverage upto 1:1000 or 1:2000. Almost every broker will suggest using leverage to earn more profit. Some can offer as high as a 1:2000 leverage ratio. Let's take an example. Suppose you're interested in trading EUR/USD currency pair. To enable you to trade one Standard lot ($100,000), your broker offers you 100:1 leverage. That means you just need $1000 to open a $100,000 position. Let's say your investment value rose to $101,000 (you're lucky!). It means you got $1000 or 100% profit on your investment. Now let's consider this. Your position sank to $99,000, in which case you lost your entire margin money of $1000, and that will trigger a margin call. That's why leverage is sometimes called a "double-edged sword." The unwise use of leverage is often the typical reason behind investors losing money in forex trading. According to forex data, approximately 70% of traders lose money. 2. Profits are not guaranteed Every broker advertises how easy their trading platform is, high leverage, and excellent customer support, but nobody tells you how risky the forex trading is. Many experts believe that forex trading is highly speculative. Earning a profit from forex requires knowledge, skill, patience, vigilance, and wise use of leverage. Forex market is very volatile and operates 24/5 market. And that makes it a notoriously unpredictable market. Gaining profits on a regular basis is difficult. If you're new to this trade, start with a demo account, and don't use leverage, at least for the first few months. 3. Volatile and unpredictable market The forex market is the biggest financial market in the world. But it is also the most volatile market. Volatility means you can lose a significant amount of money very quickly in a matter of few seconds. For instance, the recent COVID-19 pandemic caused a lot of disruption in the global economy. Except for few major currencies, many African currencies were devalued to sustain their economies. Many traders unaware of the situation lost their forex investments in quick succession. Not long ago when the Switzerland government abolished the Swiss Franc-Euro peg in 2015. The announcement caused the currency market to respond with force; Euro went into free fall against the Swiss franc. Those who invested in EUR/CHF didn't see it coming and lost their entire investment in just a few days. Any critical news can impact the forex market. Keep an eye on the financial news. The money market never sleeps. 4. Lack of liquidity/delay in execution Liquidity simply means the supply and demand volume of a particular asset. For instance, EUR/USD, USD/JPY, and GBP/USD are the world's most liquid currency pairs. They take a large chunk of global forex trading. On the other hand, USD/Mexican Peso or USD/Turkish Lira are examples of 'exotic' currency pairs. The term exotic signifies that the pair can be illiquid – lack of enough buyers and sellers and stability. Investing in exotic currencies can be risky. Another risk in forex trading arises when you or your broker cannot close the order at the right time. The delay in execution can affect returns on your investment. 5. Letting emotions come into play Many experts believe that the recent surge in forex trading after COVID-19 is due to rising unemployment and businesses going sour. Many people are looking for quick money. But forex trading is very technical and requires knowledge. Even experienced traders are not able to earn profit consistently. Don't let your emotions come into play while trading. Many traders lose their money for two simple reasons: greed and overtrading. Greed makes them take more risk, use more leverage, and trade more frequently. In simple words, be rational while trading. Don't be addicted. The forex market is not the place for betting, easy money. 6. Unregulated brokers Trading with unregulated brokers poses a serious risk to your investments. Unregulated or non-transparent brokers often lure the common investors by promising unsustainable profits. But they may not be what they seem. For instance, an ongoing investigation into the fraudulent practices of a South African online forex broker, JP Markets, revealed that 'For every loss that a client made on a transaction, JP Markets made an equal and corresponding profit.' So instead of working in the interests of their clients, JP Markets was working against them. Now imagine, if the company closes its shop, what will happen to the investors' money. That's why you must choose a well-regulated broker for currency trading. You should ideally select an online broker that is highly regulated in your own country. If online forex trading is not regulated in your country, choose a broker that is regulated by FSCA of South Africa or CMA of Kenya. While selecting a foreign broker outside of Africa, ensure that your broker has Tier I and Tier II licenses from global regulatory bodies such as FCA (UK), ASIC (Australia), and CySEC. You can refer to this comparison of best forex brokers for your research on broker fees, regulations. Choosing a regulated broker will ensure that your interests will be protected if there is a 'conflict of interest. It's already risky trading in forex; why take an unnecessary risk by trading with an unregulated broker. 7. Not all countries regulate online forex trading In Africa, online forex trading is legal in only two countries: South Africa and Kenya. The rest of the African countries including Tanzania currently lack a regulatory framework for online retail forex trading. Why is national regulation necessary? It ensures that you can turn to your national regulator if your broker is not transparent or goes bankrupt. It's a kind of investment protection you get by trading with a licensed broker. 8. Ill Advice and Scams The online world is a wild west without a sheriff. There is no end to online fraudsters that lure ordinary investors by promises like 'double your money in a month.' It's not limited to forex trading; stock trading or cryptocurrency trading faces similar risks. They all have a similar modus operandi – run the scheme for a few months/years and run away with the investors' money. If you're new to trading, always choose a well-regulated licensed broker. Similarly, there are many 'online gurus' that advise people to invest in particular assets. In reality, they are getting a commission to promote those assets or online platforms. Build your knowledge base, have faith in yourself, don't follow anyone's advice blindly. 9. Not using proper risk management Warren Buffet summarizes the value of risk management effectively in one line – "risk comes from not knowing what you're doing." Trading without proper risk management is like sailing a ship without a compass. There are specific helpful forex tools you can use to minimize the risks. For example, the 'stop loss' triggers automatically when the market moves against you. It's a handy tool in a volatile market situation. Proper risk management includes wise use of leverage, defining risk-reward ratio, building a trading plan, managing your emotions, keeping an eye on the news, investing what you can afford, and so on. Takeaway: Heed caution before starting to trade As with every trade, forex trading is inherently risky. But it doesn't mean you can't make a profit by trading in currencies. If you know when to put pressure on the gas pedal and put a break, you are more likely to earn profit from your investments. If you're entirely new to trading, start with a demo account before risking any real money in the actual trade. Choose a well-regulated broker in your country. If your country lacks forex regulation, choose a Tier I and Tier II licensed foreign broker. Calculate risk and reward ratio for each trading order. Use leverage wisely. Learn the essentials of forex trading and know the risks. Build your trading plan, don't let your emotions take over you. Use risk management tools.  |
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