Propaganda de interbank forex

Published в Can slim investing reviews for horrible bosses | Октябрь 2, 2012

propaganda de interbank forex

emerging markets, however, China's de facto measure of openness is investment on foreign exchange markets, interbank bond markets. Under the Turkish Lira and foreign exchange operations conducted at the CBRT, “Provided that the current de-escalation is sustained and that Turkey. Current exchange rate EURO (EUR) to US DOLLAR (USD) including currency converter, buying & selling rate and historical conversion chart. KANTORY W LODZI KURSY WALUT FOREX

Many emerging market economies have faced balance of payments crises following a rapid rundown of foreign exchange reserves. But if Chinese households and corporations were to withdraw bank deposits on a massive scale and transfer the money abroad, reserves would cover only about 15 percent of total deposits. To take account of such factors, the IMF calculates a composite metric of reserve adequacy that takes into consideration potential capital flow volatility.

By this measure, China had one and a half times the adequate level of reserves at the end of Even with the fall in reserves since then, the stock remains above this metric. A more worrisome aspect of capital outflows is related to capital flight through both illegitimate and legitimate channels. Capital flight is quite different from more conventional outflows that are driven by a desire for portfolio diversification or macroeconomic factors such as better interest rates in other countries.

One possibility is that the anti-corruption drive has caused some ill-gotten wealth to leave the country to avoid expropriation during the crackdown process. Illicit capital flows are a particular concern for financial stability as they bypass traditional channels that the government can control. One widely used proxy measure for such flows is net errors and omissions NEOs , which is the residual in the balance of payments accounting and reflects unrecorded capital account or current account transactions.

Negative NEOs typically reflect money leaving the country through unofficial channels. Money laundering and capital flight also go hand in hand. Casino operations in Macau have long been seen as a major conduit for money laundering and illicit capital flows from the Mainland.

Regulatory authorities on the Mainland have taken aggressive steps to combat these operations as capital flight has picked up. An alternative channel for capital flight is related to informal financial institutions that act as conduits for cross-border transfers. The level of central government debt was only 17 percent of GDP in The IMF computes a measure of augmented public debt, which includes various types of local government borrowing, including off-budget borrowing by such Local Government Financing Vehicles LGFVs via bank loans, bonds, trust loans, and other funding sources.

However, the broader picture of debt in China looks more worrisome. More recent estimates suggest that corporate debt may have risen above percent of GDP by early The level of Chinese corporate debt is a major concern, especially since a substantial portion of outstanding bank loans has gone to large SOEs. The notion that such high debt levels heighten the risks of a financial meltdown is, however, overstated.

The balance sheet of the government as a whole is healthier than an examination of just the gross debt figures would suggest. There are undoubtedly corporations that have borrowed too much and will suffer considerable financial stress, which could result in bankruptcy or painful restructuring. The government, on the other hand, has a large trove of assets—including its foreign exchange reserves, ownership stakes in the state enterprises, and foreign investments through the sovereign wealth fund.

A legitimate concern, however, is that many of the problems with debt in China will ultimately cause a collapse of the banking system, which has financed much of the debt accumulation. The average ratio of nonperforming assets NPA —loans that are unlikely to be paid back—to total bank loans outstanding is around 2 percent. But this is widely seen, even by the government itself, as an understatement of the true extent of the problem.

Private analyst estimates of the actual ratio of NPAs range from 6—7 percent to as much as 20 percent, with even higher ratios of around 25 percent for some of the smaller banks. Still, Chinese banks do not face the potentially catastrophic problems that many Western banks faced during the financial crisis. Most of their funding comes from bank deposits, which tend to be stable, rather than from debt.

Moreover, banks have about 17 percent of required reserves at the PBC. Even if a banking crisis can be avoided, however, it will still be necessary to cover losses from loans made to companies that become insolvent or go bankrupt. This could involve a combination of two types of measures—sweeping nonperforming assets into asset management companies and infusing new capital into the banks. This will ultimately result in a fiscal cost. This cost would be reduced by partial loan recoveries, asset sales, and the use of loan loss provisions that banks maintain.

Still, the fiscal cost will be substantial. A bigger question the Chinese economy faces is whether the financial system, especially the banks, are being freed up from government directives and allowed to operate on a commercial basis to a greater extent.

While there has been modest progress on banking reforms, at a minimum addressing the legacy problems created by state-directed lending and distorted incentives in the banking system will incur significant costs. The government has also taken a more aggressive approach to rein in shadow banking, which involves credit intermediation through entities and activities outside the regular banking system.

Definitions of the shadow banking system vary, but the major categories of credit that fall under its rubric include i entrusted loans, which involve nonfinancial corporates as borrowers and lenders, with banks acting as intermediaries but bearing none of the credit risks; ii trust loans, which are financial transactions undertaken by trust companies that are regulated separately from banks and have some characteristics of banks and fund managers; and iii bank acceptances, instruments issued by banks that commit to pay a fixed amount in a given period and that are backed by deposits of the party seeking these certificates.

There is a range of other instruments included in definitions of the shadow banking system, including wealth management products WMPs that offer higher returns than traditional bank deposits and that can even be offered by banks themselves. The shadow banking system is not large relative to that in many advanced economies, although its growth rate in China in recent years is certainly among the highest in the major economies.

Concerns about the financial stability risks posed by the growth of shadow banking have prompted the Chinese authorities to impose stricter regulation of shadow banking activities, both by banks and nonbank financial entities.

Off-balance sheet activities by the commercial banks could affect their risk profiles. While trust companies and other nonbank financial entities are not backed by the government, their liabilities pose broader risks as the failure of any such institution could undermine confidence in the overall financial system.

In its present form and at current levels, it is unlikely that the shadow banking system by itself poses significant threats to overall financial stability. Nevertheless, the government has been concerned that risks in this sector could translate into vulnerabilities in the formal banking system given the connections between the two sectors through products such as WMPs.

With rising concerns about the financial stability implications of the shadow banking sector, various regulatory agencies have stepped up their oversight of this sector. This has resulted in a decline in shadow banking. In recent months, the flow of credit associated with shadow banking has been small or even negative. Stock Market Swings After a sharp run-up during and the first half of , Chinese stock market indexes have fallen sharply.

This prompted a series of measures by the government to limit the stock market turmoil. Some of these measures were heavily interventionist and, although described as emergency measures, they have hurt the credibility of the government and created doubts about its attitude toward marketoriented reforms. The measures included propping up stock prices and also limiting activity that could push down prices.

In addition, nearly people were arrested for allegedly spreading false information that caused the market crash. Those arrested included financial practitioners, regulatory officials, and also financial journalists. This led to a negative reaction in markets, with the main indexes plunging by about 14 percent over the next three days. The circuit breakers were activated multiple times during that period, worsening the sell-off as many market participants tried to sell their holdings before the circuit breakers were activated.

The circuit breaker was deactivated three days after its introduction. Chinese stock markets have been prone to concerns about weak corporate governance, limited transparency, weak auditing standards, and shoddy accounting practices. In the absence of broad institutional and regulatory reforms that are necessary to support effective price discovery and the overall efficient functioning of stock markets, these markets could remain unstable.

The recent volatility in the stock market and the manner in which the government has addressed it has heightened many of these concerns. Policy Instability There are two reasons to be concerned about the path that China is taking towards market-oriented reforms. The first is the unbalanced nature of the reforms. Reforms on the real side of the economy have not kept pace with financial liberalization. The 13th five year plan echoes many items from the previous plan, including further restructuring of state enterprises, liberalization of the services sector so new firms can more easily enter this sector and operate with fewer restrictions, streamlining of the tax and public expenditure systems, and easing of restrictions on labor mobility within and across provinces.

The turmoil in equity and currency markets during and appears to have shaken confidence in the economic management skills of the leadership. Such volatility, and the heavy-handed intervention it has sometimes provoked, could erode political support and economic space even for the reforms to which the technocrats are committed.

A more fundamental concern is that the government seems to be caught in a deep internal conflict between its stated objective of letting markets operate freely and its desire to maintain stability and control above all else. These include: Permitting the settlement of trade transactions with RMB. Permitting selected banks to offer offshore RMB deposit accounts. Creating a payment system for easier settlement of cross-border RMB transactions. These steps are gaining traction, although they are still modest in scale.

The RMB has become the fifth-most important payment currency but still accounts for less than 3 percent of worldwide payments for cross-border trade and financial transactions. The RMB also accounts for less than 2 percent of turnover in global foreign exchange markets.

China has set up a new payment system—the China International Payment System—that is organized more in line with internationally accepted standards, which is essential for facilitating cross-border RMB transactions, including trade and investment flows.

The payment system provides a central platform that helps clear interbank financial transactions in a standardized manner both domestically and internationally. Countering inflation by cutting back supply-of-goods-and-services in an attempt to curb demand-for-goods-and-services makes no sense when a consumer-savings tool can be created to stop inflation directly and more effectively.

This is achieved by modifying "The Public Banking Act" as recently introduced in Congress to create a digital cybersecurity block-chained Federal Reserve smartphone bank account for every American. Just as ATMs can be used by competing banks for a fee, private banks could be offered a fee to host these Federal Reserve bank accounts for individuals who prefer physical rather than direct online computer and smartphone digital banking.

To focus these accounts on consumers with a high marginal propensity to consume and to avoid competing with commercial banks for large accounts, these accounts could be restricted to one account per Social Security number and interest could be earned only on some base amount e. However, account holders could add additional money up to a specified annual limit until the total in their account reached the base amount.

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In general, they are more concerned about the information disseminating throughout the market, then just purchasing or selling a currency pair. Commercial banks, investment banks, trading companies and hedge funds generally participate in the interbank market as market makers.

A market maker is a trader that makes a price for another trader. Market makers are willing to accept the risks associated with holding positions in a currency pair for a period of time, to attain information as well as to receive a potential profit. Generally, an interbank operation only has one or two dealers for each currency pair.

Usually there is a primary interbank dealer and possibly a secondary dealer. Each region across the globe will have a location where there is a primary dealer who will be responsible for a currency pair. These dealers would pass a book from region to region as the prior region becomes less liquid. Large financial institutions want experts for each currency pair, so instead of having 4 or 5 dealers covering 20 currency pairs, they will more likely have 1 or 2 dealers for each.

For emerging market trading, dealers will generally focus on a region. That means there could be dealers who focus on South America, making exchange rate quotes in the Chilean Peso as well as the Brazilian Real for example. Profiting from the Bid-Offer Spread Market makers generate revenues by purchasing a currency pair on the bid, and selling the currency pair on the offer. They are trying to capture the interbank fx spread.

The bid is the price traders are willing to purchase a currency pair for, while the offer is the price where traders are willing to sell a currency pair. Market makers attempt to generate profits by purchasing on the bid and selling on the offer, while hedging their position risk.

Many times, a dealer will need to hold a position for an extended period, especially if the size of the transaction is too large to unwind all at one time. The inventory an interbank dealer holds will also determine the exchange rate. Dealers also have a view of the market and this bias will also help influence the interbank exchange rate. Another reason that market makers provide exchange rates is to attain information. By providing clients and other market makers with liquidity they can see large transactions which can move a market.

This type of information is extremely helpful since many times there is no record of the transaction that others are aware of. When stocks are traded on an exchange, there is a record of the transaction which can be viewed by everyone. This is also true for futures trades , but over the counter currency trades do not have to be posted. Many of these financial institutions have clients that transact and take advice in all aspects of their businesses. For example, a large commercial bank might be lending money to a client, as well as providing corporate finance and investment banking advice, along with providing foreign exchange dealing operations.

By handling a wide breadth of services, a commercial bank can attract investors to dealing desks. These institutions might also provide other dealing operations such as interest rate dealing for both interest rate swaps and credit default swaps. Cross dealing opportunities make a bank an attractive place to trade the interbank forex market. What is key for an interbank forex broker is to have access to Market Depth.

The depth of a market such as the foreign exchange market, shows a dealer the different levels that clients want to enter or exit trades. Many of their clients are not concerned about trying to capture every available pip, and might be more concerned about getting into a trade or hedge at a specific level. The market depth that a trader can see not only includes the specific exchange rate that an order is expected to be executed at but also the volume of the trade.

This information is critical as it can supply the dealer with key information about support and resistance levels. Each level shows what is on the bid and what is on the offer along with the number of trades and the size of the trade. Each order book is different and shows you the volume along with the price. By having access to market depth an interbank dealer can trade around that book, to make money.

Usually there are many trades with smaller volumes near the current price of the exchange rate, while volumes increase as you move further. When prices reach a specific level, an interbank dealer can use their order book to determine if the market will be supported at that level or slice through it generating accelerating momentum. Many times, interbank dealers will use support and resistance lines or moving averages to assist in determining if there is technical confluence in tandem with their market depth order book.

The information received from clients is also key to interbank dealing success. For example, if a dealer has a large trade with a hedge fund, the direction that the market takes following their transaction can be different compared to the direction the market follows if a multi-national client is trading mainly to hedge their portfolio.

These companies may want to hedge their portfolio at the most advantageous time, but since these traders are not typically market timing professionals, nor paid based on how well their hedge performs, the trade is less likely to result in a sustained move relative to a hedge fund manager that focuses on global macro trading and is willing to support a longer-term view in the market.

So, if an interbank dealer does a large transaction with a corporate treasurer, they may assume that the transaction was not specifically geared to generate revenue from the trade. In fact, a dealer in this situation might determine that this type of transaction will not push the market in the direction of the currency trade for any sustained period of time. If, on the other hand, the transaction is traded by a hedge fund, the interbank dealer might decide that the hedge fund knows where the market might be going and use that information in a way to generate revenue for their own desk.

Most of the time an interbank dealer will attempt to lay off the risk they assume, within the course of a day. The interbank dealer is paid to deal and provide information to others within the trading organization. Prior to the financial crisis in , interbank dealers had the liberty to trade significant volumes of currencies, taking positions over days, weeks or even months.

Today, the leeway to take prolonged positions has been greatly reduced. Offsetting Position Risk Once a primary dealer takes a position they will need to offset the risk. Most of those are banks, large financial institutions, investment banks, and mutual funds corporations and do not include retail forex institutions or traders. The interbank rate numbers are what you see when you search in Google the currency exchange rate for a particular pair, but this is not the rate at which you can trade a pair.

This rate is only available for the interbank market participants who are usually big financial corporations trading in millions and billions. The price you see is a jacked-up price of the interbank rate in your platform. Your rate is the sum of interbank rate and the spread which your platform charges for trade as profit.

The minimum transaction in the interbank market is in millions; hence the retail traders will not be able to afford the interbank rate. The interbank market participants trade currencies to manage their exchange rate and control interest rate risk.

Although, you can neither control nor trade at the interbank rate, important for traders to be aware of the interbank rate to avoid getting scammed by Forex brokers who main charge way above the interbank rate. The decentralized system of Forex allows for self-regulation, and hence the interbank rates hand the actual exchange rates available to traders are competitive and self-correcting.

However, novice traders who are not aware of this might lose money by paying an excessive spread to brokers. Economic Reports Federal Reserve determines the interbank rate, and the average of all the interbank rates in all the lending transactions between the banks in the United States is called the Fed Funds Rate.

The interbank credit system is applicable for a short period, usually ranging from overnight to a maximum of a week. Hence, the interbank rate is also called the Fed Funds Rate. On the 1st of every month, the Fed Funds Rate is released. How can the Interbank Rate be Used for Analysis? The Fed Funds Rate drives money in and out of the economy. The Fed Funds Rate drives the interest rate on bank loans that is available to the public and businesses. A higher Fed Funds Rate would mean that loans are now expensive than before.

To take a loan now would mean paying more interest rate. Hence the general public is discouraged from taking loans indirectly. On the other hand, now it would be more profitable to save as they receive a higher interest rate on their deposits. Both these factors can change the general public sentiment on money spending. A high-interest rate environment withdraws money from the economy, thereby slowing down economic activity as people are less willing to spend.

Conversely, a low interbank rate encourages banks to give loans at a cheaper rate, and hence more businesses and people will be able to afford loans; this will ultimately lead to the injection of money into the system overall. When more money is available to a company or an individual, the natural tendency is to increase spending, businesses may use for expansion plans.

All of this will stimulate economic growth and result in printing higher levels of GDP. Since Central authorities use the fed funds rate to manage the economy and money supply, a historical correlation of interest rates with GDP growth rates can help us to determine the direction of the economy and the value of its currency. It is a proportional indicator meaning higher interbank rates relate to currency appreciating phenomenon and vice versa.

Higher Interbank rates result in banks paying out higher interest rates for deposits, which can also attract foreign investors to purchase domestic currency to make a deposit and earn better returns on their investment.

Therefore, an increase in capital flowing into the economy and decreased local currency circulation in the rest of the world, thereby increasing its demand and worth. A low interbank rate results in increased money flow into the system, which can be inflationary, thereby depreciating the purchasing power of its currency. Conversely, a higher interbank rate results in decreased money circulation in the system, which will be deflationary for the economy, and the reduced demand for goods and services will increase the purchasing power of the currency as people would tend to save than spend.

Even though the interbank rate changes do not immediately get reflected in the macroeconomic numbers like GDP and currency value, it is a slow indicator in that sense that it takes a particular time weeks to few months to show its effect in actuality. It is also important to know that the authorities use the interbank rate as a response or corrective measure to the current economic situation.

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