Investing

The First Day of Trading does not a Year Make

Chinese shares and the yuan stabilized with the apparent help of the government's guiding hand, but global markets are still on the defensive.  The euro extended yesterday's decline through the $1.08 level.  The next immediate technical objective is near $1.0730.

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Halfway to the (First) Holiday

The thinness of the order-driven capital markets is making price action that seems more inexplicable than usual.  The US dollar is mixed. It has recouped all the ground it lows against the euro yesterday, as the single currency briefly dipped below $1.09 in the North American morning.  It was unable to build on yesterday's gains that had carried it up to almost $1.0950.  Despite some fraying, the $1.08-$1.10 trading range still seems intact.

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Futures Activity Predictably Higher Pre-FOMC

Speculative position adjustments in the currency futures were minimal in the immediate aftermath of the ECB's December 3 meeting and US employment data the following day. However, activity dramatically increased in the days ahead of the FOMC meeting on December 16.

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Green Bonds Still in Too Few Hands

The climate summit in Paris has shown that global big business is now also on board with the transition to a low-carbon economy.  However, the most promising instruments in finance for promoting green investing, particularly green bonds, have been around for almost a decade now, starting with the European Investment Bank (EIB) Climate Awareness Bond in 2007.

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Speculators in the Futures Market are Getting Fiesty

Activity increased during the Commitment of Traders reporting week ending 8 December.  There were four significant (10k+ contracts) gross currency adjustments by speculators.  Given that this period covers the second largest gain in the euro's history, it is surprising that it did not meet the threshold. 

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Cutting Two-Thirds of your Workforce: Not a Good Sign

Anglo American, one of the largest mining companies in the world, has announced a restructure that will cut 85,000 jobs worldwide, a reduction of its workforce by almost two-thirds. The move follows a huge downturn in commodities prices, which have been decreasing since 2011 and have hurt the revenues and profits of mining companies across the globe.

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Are Dollar Dominant Days Done?

The cat is finally out of the bag. The IMF has confirmed that the Chinese yuan will be included in the Special Drawing Rights (SDR) basket of reserve currencies. It was only a matter of time until the IMF acted on this, despite the considerable pressure exerted from the United States and other developed economies.

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The CNY-CNH Gap is Widening

China’s instructions from the IMF were that, as an operational requirement for joining the SDR, the gap between the onshore and offshore yuan (CNY and CNH respectively) needs to close.  This was important for central banks to hedge.  The opposite is taking place.

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Initial Selling of the ECB News, at Least in Currencies

The market's disappointment with the ECB unleashed pent-up corrective forces in the foreign exchange market.  This leg up in the dollar began in mid-October.  Through the day before the ECB, the euro was the weakest of the major currencies, losing 7.5% against the dollar.

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Yuan SDR Inclusion is a Sino the Times

It is official.  The Chinese yuan will be in the SDR.  At a 10.4% share, it is a bit more than I expected, but less than the 14%-16% share that the IMF staff has intimated a few months ago.  This is a significant event, even if there is no short-term market opportunity. 

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