Tag Archives: currency

BoT Governor Dismisses Trump’s Claims of Currency Manipulation

The Bank of Thailand has defended itself from Trump’s accusation of currency manipulation. The central bank’s governor, Veerathai Santiprabhob said in an announcement that there is no evidence implicating any of its officials of currency manipulation to illegally boost exports.

Veerathai released the response after the US decided to carry out an investigation on Southeast Asian nations for potential trade abuse.

According to sources, it’s a common act of central banks to get involved in foreign-exchange matters in times of need such as inflationary environment and geopolitical crises. In an interview with Haslinda Amin of Bloomberg Television, Veerathai dismissed Trump’s allegations.

He said, “I don’t think anyone has evidence that Thailand has manipulated the currency to gain an unfair competitive advantage. Thailand has not adopted any exchange-rate policies to gain an unfair competitive advantage in trade.”

Veerathai defended Thailand saying that the central bank’s foreign-exchange interventions were mostly caused by capital inflows which “have been coming in in a short period of time that could create adverse consequences.” He continued, “At times, we might have to intervene in the foreign-exchange market but that’s largely because of the intense capital inflows that we are on the receiving end of.”

US President Donald Trump has recently released an executive order that will probe 16 countries which have the biggest bilateral trade deficits with the world’s largest economy. Thailand is one of the countries on the receiving end of the order and is expected to be hit greatly because of the country’s dependency on exports. Currently, BoT is buffing up foreign-exchange reserves since the end of 2016 after inflows sharply increased. This move capped the baht’s advances.

Veerathai added that foreign-exchange intervention is normal. He explained, “Foreign-exchange intervention is definitely a measure that all central banks need to have on the menu list but there are also other policy measures that one can look at, from market-based measures to the likes of capital-flow management measures.”

Thailand have one of the largest trading surplus with the US. It is at 11th place.

Top Currencies For 2016

The year 2016 is an anticipated chaos for currencies due to the many things that happened in 2015 especially with the developments in the dollar and the yuan. Last year saw the rigorous rise of the dollar versus the other major currencies of the world. Meanwhile, the China experienced a crucial summer that saw the shock devaluation of its major currency, the yuan.

It has been a rough beginning of the year for the global markets and it is apparent that the following currencies will take the most hit after last years developments.

The Canadian Dollar
The Canadian Dollar or CAD or more widely known in the forex industry as the loonie, has dramatically decreased against the US dollar or the greenback. For the year 2015, the loonie took a hit of 16%. Among the world’s 16 major currencies, it performed as the third worst currency in the previous year due to a slew of bearish factors that hit the country: slowing global growth, interest rate reduction by the Bank of Canada, recession in the first six months of 2015, 30% decline in crude oil prices, and declining commodity prices. All these events had dragged down the Canadian currency. That 16% slide also did not come as a surprise. For the past three years, the loonie has been on a steady decline which totals to 28% loss against the dollar.

This year will, hopefully, be a better year for the loonie. As the events that previously dragged the currency have abated. It is an anticipated year of benefits for the Canadian economy too due to the weak currency and the monetary and fiscal stimulus among other major economies.

The Euro
The Euro’s performance in the previous year can be summed up as a constant decline. The region had a rather rough year with Greece going into political crisis in the first half of the year. This had the world economy turning its spotlight on the euro area with concern on its future. The currency has since been constrained under the weight of several geographical situations. Moreover, the euro’s unexpected devaluation in August 2015 added to the fall of the euro. And by December, the expectations for expanded monetary stimulus measures from the European Central Bank has dragged the euro down 1.05 versus the dollar. However, the expected monetary stimulus weren’t as tense as anticipated, giving the euro the chance to rebound. In total, the euro dropped by 10.2% against the dollar for the year 2015.

Forecast for the year 2016 puts the euro in a slower decline with analysts predicting a balance between the euro and the greenback. Be on the lookout for a stable euro for the year 2016.

The Yuan
Perhaps the most popular currency in the recent months is China’s yuan because while the dollar dominates the forex market, it is the yuan that is under the spotlight in the world economy stage. What makes the yuan prominent is its independency from market forces that determine the exchange rate. The yuan is not a floating currency but a managed currency controlled by the central bank of China or the People’s Bank of China (PBOC). The PBOC employs a managed float system to match the currencies of the world. And from 2004 up until 2014, the Asian giant allowed the continuous appreciation of their currency as part of their seclusion. However, this ended after US lawmakers called for the revaluation of yuan as an answer to the soaring trade deficit of the US with China.

The beginning of 2016 has brought the Chinese currency to its lowest in nearly five years. Market participants are shaken by this because it entails the following: a weaker Chinese economy than the numbers show and a more intense deflation for the global economy. The world is, apparently, affected greatly by what happens to China. So this year, expect China to be at the center of the global eye.

Look out for these currencies as they would be part of the market force that will indicate how the world economy will be.

Clash of Currencies: The History of the Dollar

Since its creation, money has been one of the most important aspect of our lives. It has also been one of the most famous in inciting war. It has been used to buy armies for ancient kings while feudal lords undermined each other’s treasuries. Money has been the root of many clashes, one of which is the British Empire and its colony in America.
During its colonization, American colonies were held tightly by the English. Money was limited. Mint coins were illegal. Trading with other countries was impossible. The only choice given to the colonies were to trade with English bills for English goods. Because of this, the colonies were forced to go back to the barter system using nails, pelts, ammunition, tobacco, etc.
In 1652, the British Empire had vacated the monarchy and Massachusetts became the first colony to rebel against the British Empire as they minted their own silver coins along with their very own shilling from pine and oak. The first paper money came in 1690. The colony was able to find a loophole in the British law that stated that the issuance of coins may only be done under the monarch. The Revolutionary War soon followed. In 1775, the colonial leaders declared independence and at the same time produced a new currency called “continentals.” Due to the currency not being mounted to any standard, it soon became worthless, spurring inflation.
After the war, most currencies were useless until 1788 when Congress established a national monetary system which they also regulated. This is the creation of the dollar which was also set to a bimetallic standard, the gold and the silver. State currencies clashed to dominate before the disputes settled in the early 1800’s when paper money was circulated once again.
The greenback was then produced to finance the Civil War which became useless after the ordeal. Then came the 1900 when the Gold Standard Act, pinning the dollar to gold. In 1913, the Federal Reserve came into being. In 1971, the dollar was removed from the Gold Standard Act to make more money than there was gold.
Today, the worth of money is measured by its purchasing power as dictated by inflation. The American economy is maintained to make sure that it doesn’t plunge and take with it the global economy.

The Factors the Affect Forex Option Trading Costs

Factors in Option Trading Costs
Forex Options have no definite price. Understanding the factors that affect this is essential for any trader that wants to conquer the field of Forex Options trading.
In pricing the options, there are several factors to consider to appropriately determine its value. Learning this is essential to understand how an option works.

  1. Volatility – Volatility is the measure of uncertainty or risk with regards to the size of change in an option’s value. Higher volatility means increased chances of hitting the strike price within the limited time period. This is why as the currencies get more volatile, the higher the options premiums are.
  2. Time Value – This is the length of time where the strike price can occur where pricing is uncertain. Naturally, the longer the time value is, the chances of hitting the strike price is increased that is why premiums are higher.
  3. Interest Rate Differential – The relationship between the strike price and  the current market rate is significantly affected by the changes in interest rates that’s why it is included in the computation of the premium price as a function of the time value.
  4. Intrinsic Value – The intrinsic value is the options price currently without the time value. It is used as basis to determine a strike price that can be one of the following:
    1. “In the money” – the current price is lower than the strike price.
    2. “Out of the money” – the current price is higher than the strike price
    3. “At the money” – the current price is the same value as the strike price