China is the world’s second largest economy and a vital player on the global stage. An economic recession or financial crash in China would be felt around the world. Investors not paying at least some attention to China are not properly managing risk in today’s globalized financial markets. At Young Research, we have been following the slow, bubbly capital exodus from China. China’s foreign currency reserves are down over $1 Trillion over the last 17 months. Last year after allowing the yuan to depreciate to almost 7 per dollar, China put the brakes on further depreciation. That was paid … [Read more...]
Gold, Silver, and Currencies
Young Research & Publishing has been providing research and insights on precious metals and currency markets to institutional investors, corporate financial officers, business owners, and individual investors for over four decades. Richard C. Young started Young Research & Publishing in the 70s to publish the authoritative Young's World Money Forecast, a 50-page monthly investment report on the precious metals and currency markets. Today, our research on gold, silver, and currencies is geared toward investors in or nearing retirement who are looking to preserve and protect wealth.
China Just Delivered a Devastating Blow to Speculators
China just hammered speculators with a surprise strengthening of the yuan. The yuan made its biggest-ever two-day move. China has been burning through currency reserves in an effort to keep the yuan from depreciating too rapidly. The surprise strengthening is a new tactic likely intended to drive speculators out of the currency and to strengthen China's hand in currency markets. The Financial Times has more of the details: China’s renminbi has made its biggest-ever two-day gain as strong data and shrinking liquidity offshore wrongfooted China bears and helped push the dollar lower around … [Read more...]
Can the Swiss Defy the Frightening New Anti-Cash Trend?
Governments around the world claim moving toward a cashless society aids in tracking potential fraud through a switch to electronic payments. The Wall Street Journal lays out Swiss opposition to the global trend. I share the Swiss aversion to an electronic payments system where the government would instantly have an open window to your financial transactions. The Swiss love cash, and use it regularly to pay for purchases large and small—monthly utility bills can be paid in cash at post offices. Their affinity shows no sign of abating, and flies in the face of a global trend toward cashless … [Read more...]
This is the Currency Trend to Watch
Capital is flowing out of China again, and at an accelerating rate. The yuan has fallen to a fresh six year low as capital flows out of the country. The WSJ reports that China’s foreign currency war chest, while still formidable, has plunged by almost $46 billion in October. Goldman Sachs says that the outflows from China are running at a rate of almost $80 billion per month. While Beijing has tried to stem the outflows, the Chinese are finding ways to pull money out of the country. The WSJ offers some insight “Can anyone tell me what has happened to the renminbi’s exchange rate? How … [Read more...]
Fidelity Sees Yen as Low at 120
Keeping long-term bond yields at zero is never a good strategy for currency strength. But that is exactly what the Bank of Japan is doing. As a result, the dollar has strengthened 4% against the yen over the last month. Perhaps the only thing holding the yen up this high is the market's disbelief in the Federal Reserve's readiness to raise rates. Janet Yellen's recent speech about running the economy at "high pressure" (Read: inflationary) only reinforced the market's belief that no interest rate increase is forthcoming. That could be the yen lifeline Tokyo is looking for. Bloomberg … [Read more...]
Why You Should be Watching China’s Currency
The Chinese yuan has fallen to a new six-year low as outflows surge. The central bank has either been overwhelmed by currency flooding out of the country, or it is allowing the yuan to drift lower to help the economy. The Chinese economy is the world's second largest, and China has long been a source of deflationary pressure in the world. A depreciating yuan points toward more deflationary pressure for the rest of the world. As you can see in our chart below, a depreciating yuan hasn't worked out so well for the U.S. stock market. Bloomberg has more on the weakening yen. China’s outbound … [Read more...]
How much more Downside does the British Pound have?
According to Goldman Sachs, much more. Here's Goldman's take via Zerohedge: How Much More Sterling Downside? (via Goldman Sachs) 1. With the prospect of a 'hard Brexit' becoming a reality, investors who were previously expecting a 'soft' Brexit, or no Brexit at all, have updated their priors, and Sterling has depreciated about 5 percent over the space of a week against G10 currencies. GBP/$ is about 1.5 percent above 1.20, which is our 3-months forecast published on 5 July 2016. In a recent Global Markets Daily ("How Much Sterling Downside?, 6 Oct 2016), we highlighted that risks to our … [Read more...]
A Flash Crash in one of the World’s Reserve Currencies
When we wrote on Wednesday that it was probably too early to take an aggressive position in the British Pound we apparently weren’t kidding. Overnight, the British pound crashed, falling as much as ten percent in the early Asian session. This is one of the world’s largest and most liquid currency markets. The pound-dollar pair is the third most traded currency pair in the world, with $470 billion exchanged on a daily basis. For some perspective on that number, Apple, the world’s largest publicly traded company, only trades about $4 billion per day. What caused the crash in the pound? The … [Read more...]
Is the British Pound a Good Buy Today?
The biggest casualty of the Brexit vote thus far has not been the stock market or the bond market as many predicted, but the market for British pounds. The pound sold-off yesterday and is now trading at a more than two-decade low. Technical analysts would likely tell you that charts don’t offer much in the way of support for the world’s former premier reserve currency. Based on the charts, a move toward parity looks possible, though we wouldn’t say probable. For some perspective, I’ve included a long-term chart (yes really, really, long) on the pound / dollar exchange rate. The pound is … [Read more...]
Is Switzerland’s Amazing Negative Interest Scheme Working?
Swissinfo.ch alerts investors worldwide to a pretty astounding current outcome: The Swiss still refer to the day of the “Frankenschock”. On January 15 last year, their stable economic lives were shattered by news the Swiss National Bank (SNB) had abandoned its cap on the super-strong franc’s value against the weak euro. To deter investor inflows, the central bank instead pushed its main policy interest rate even deeper into negative territory – to minus 0.75%. Almost two years later, the affluent Alpine state’s financial system still functions despite the most negative interest rates in … [Read more...]
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