Defining the Yuan as 'Freely Usable'

On the last day of November, at the conclusion of its five-yearly review of the composition of the Special Drawing Rights (SDR), the IMF elevated the renminbi to its SDR basket. The RMB is now one of five major ‘freely usable’ reserve currencies in the international monetary system.

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Latin America's Smooth Economic Ride Jeopardized by Commodity Crisis

Much of Latin America has seen an unusually long period of relative political stability since the early 2000s. With the exception of Cuba, democratically elected governments seem embedded throughout the region. The political rules of the game largely seem to be followed. Indeed, the international outcry following the 2009 coup that removed Honduras' president, Manuel Zelaya, served to reinforce how much Latin American politics had changed since the 1970s, when military dictatorships were the dominant form of government.

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What is Driving Sterling Lower?

Sterling fell 4.25% from the high on December 28 to yesterday.  It has been confined to yesterday's range today.  After finishing below the lower Bollinger Band yesterday, it has moved back into the band today.

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Dollar-Yen Relationship Quirks

Since the initial spike higher when the BOJ provided some operational tweaks to its asset purchase program on December 18, the dollar has fallen 5.6% against the yen through Tuesday's low near JPY116.70.  We had warned that the break of JPY120 would spur a move to JPY118, and the move below JPY118 targeted the August low near JPY116.20.

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Use Your Illusion

I was canoeing recently.  When I looked that oar in the water, it looked bent.  It wasn't my equipment, and I am a novice.  I cursed to myself and quickly pulled the oar from the water.  I smiled.  It was not bent.  It was an optical illusion.

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The BOE Meets This Week, but Likely Won't Help the Pound

A subdued Chinese session, with the yuan, little changed and local equities securing minor gains, let market participants look elsewhere for directional cues.  The new lows in oil, near $30 a barrel, and the bankruptcy filing of Glencore's US subsidiary Sherwin Alumina seemed to weigh on the dollar-bloc currencies.

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When Currency Manipulation is not the Answer

The broad measures of the US dollar are trending higher, and former Fed Chair Bernanke recently refuted claims the US was engaged in a currency war. Many observers had thought that with its unprecedented asset-purchase program, the BOJ was engaged in a currency war.

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China's Equity Market Form and Function

Developments in China seemed to overshadow other considerations as investors returned from the New Year.  The offices were open and desks manned, yet many did not appear to be prepared to re-deploy resources.  The lack of participation helps explain last week's drama. Sellers showed up or were forced through money management practices (e.g. stop-losses or options triggered).

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Speculators Surprisingly Add Exposure

Due to the holidays, the CFTC has been releasing its Commitment of Traders report late.  With this week's report, the normal Friday release schedule resumes.  The latest report covers the shortened week through January 5.  It is not surprising to find that speculative position adjustments were minor.

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China's Latest Rocky Road

Recent market volatility is neither entirely warranted nor unexpected. In China, it reflects a confluence of forces; but in the US and internationally, international worries are fueling the volatility.  On Monday, January 4, China's A-shares plunged by about 7%, whereas the renminbi (RMB) weakened to 6.52 relative to US dollar.

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The Shanghai Stock Market's Wild Ride

The Shanghai stock market has had a rough start to the New Year. Bourses are down and trading was halted on its opening day after the market plunged, triggering the new circuit-breaker mechanism designed to limit volatility. It looks as though 2016 will be no less turbulent for China’s stock market than 2015.

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Could Gold be Forming a Bottom?

With equity markets tumbling, escalating tensions between a Saudi-led Sunni bloc against Iran, ongoing hostilities in Syria, North Korea testing what it claims to be a hydrogen bomb, the once precious yellow metal is looking perky.

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The Yen Flexes Some Muscle

Last year was the fourth consecutive year that the yen fell against the dollar.  However, obscured by this factoid is that over the past six months, the yen has been the strongest of the major currencies, rising almost 3.2% against the US dollar.

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