Forex Reader

– By Pushpa Sathish, Staff Writer

The much-talked-about, possible merger between the New York Stock Exchange (NYSE) and the Tokyo Stock Exchange (TSE) is not on the cards any time in the near future, if a statement from TSE is to be believed. The two bourses will tie up only after the current projects at the TSE show signs of progress.

The statement follows reports of the NYSE showing interest in an Asian expansion, with its sights set on positions in Japan, China and India. CEO of the NYSE group John Thain had met TSE’s CEO Taizo Nishimuro to discuss the possibility of a trade link between the two exchanges. A report stated that NYSE had proposed a 10 percent stake for each exchange in the other’s operations, to be put into effect by 2009. 

TSE has problems of its own to tackle before it considers such a merger seriously. The bourse is attempting to get listed following disasters such as a system crash, a botched trade and a closure following a scandal that threatened to crash its trading system. The exchange issued a statement in June earlier this year that it hoped to list in 2009 after regaining the trust of its investors.

– By Pushpa Sathish, Staff Writer

North Korea is in the news again, and the headlines are not positive. Following the furor it caused with its nuclear tests, the Asian country is now in the limelight for its alleged counterfeiting activities. According to a report issued by the U.S. Treasury, the counterfeit dollars, dubbed supernotes, are being churned out with the blessings of the North Korean government.

The racket has been going on since 1989, with at least 22 million notes having been circulated over the years. The report says that $50 million worth of these have been seized by U.S. agents. Interpol has been doing its bit to stop this fraud by issuing warnings when North Korea attempted to purchase printing equipment to aid its counterfeiting efforts.

The U.S government severed ties with a Chinese bank in Macau last year after it was suspected to have had a hand in distributing the supernotes. VOA News reports:

“We very clearly have been quite concerned about North Korea’s illicit activities, including counterfeiting of U.S. currency,” said U.S. State Department spokesman Sean McCormack. “And the United States is going to continue actions it deems appropriate to protect itself in this regard to protect its currency. This is a very basic function of government - protecting its own currency. We think that every state around the world would take steps to do so.”

– By Pushpa Sathish, Staff Writer

Following the break in the tightening of credit by the Federal Reserve, there’s been a sharp rise in the purchase of US securities. Treasury Department sources said that net purchases reached a record $116.8 billion in August, with acquisitions in August alone totaling $32.9 billion. Foreign investors are also buying Treasury notes and bonds. Private investors purchase $29.2 billion worth of notes in August while official institutions overseas invested $17.4 billion in them. Chron reports:

Japan remained the largest holder of U.S. Treasury securities, with $644.2 billion in August. China remained the second-largest, with $339.0 billion and Britain remained third with holdings of $201.4 billion.

– By Pushpa Sathish, Staff Writer

The merger of the two largest futures exchanges in the US, the Chicago Mercantile Exchange and the Chicago Board of Trade, has increased interest in the public offering of the largest energy marketplace in the world, the New York Mercantile Exchange (Nymex). The exchange expects to rake in at least $5 billion from this year’s sale, but is waiting for approval from the US Securities and Exchange Commission before detailing how it will use the proceeds from the sale. Bloomberg reports:

Ninety-one percent of Nymex shareholders voted in favor of the sale last week, increasing the total number of shares to 95.5 million. The exchange’s 816 members received 73.4 million shares in connection with the sale of a stake to buyout firm General Atlantic LLC earlier this year.

– By Pushpa Sathish, Staff Writer

To protect itself from fluctuations in foreign exchange rates that may affect it adversely as a result of its equity investment in Bank Islam Malaysia Bhd, Dubai Financial LLC (DF) has agreed to an Islamic cross currency hedge transaction with Citibank Malaysia. According to the terms of the transaction, DF and Citibank will swap currency profit rates for five years, and trade in various commodities in different currencies. The Star reports:

The $230 million currency profit rate swap was the first cross border syariah compliant forex hedge transaction in the world based on the Murabahah principle, Citigroup Malaysia said in a statement.

– By Pushpa Sathish, Staff Writer

The rumors of consolidation have turned out to have a grain of truth in them. The United States’ two largest futures exchanges, Chicago Mercantile Exchange Holdings Inc. (CME) and CBOT Holdings Inc. (CBOT) have merged with the former taking control over the latter. The combined unit expects to provide service of higher quality to its increased customer base at a lower operating cost. More than $125 million is expected to be saved in annual costs. Shares of both exchanges rose following the announcement. Business Scotsman reports:

The CBOT exchange includes Treasury futures, as well as agricultural commodity futures, while CME’s exchange includes interest rate, equity index, and foreign exchange futures.

– By Pushpa Sathish, Staff Writer

Foreign securities, stocks, bonds, and money market paper are looking increasingly good to Canadian investors. Ever since the elimination of limits imposed on pension and retirement savings accounts investing in foreign content, pension funds have snapped up stocks like hotcakes. The total purchase so far this year has exceeded the annual figure of the previous four years.

Some of the most popular acquisitions are US Treasury securities, British bonds, US and foreign stocks, and non-US money market paper. Foreign bonds have contributed to more than half of the purchases made so far this year, a huge increase when compared to the 6 percent in 2000.

According to Statistics Canada, the month of August alone saw $12.3 billion worth of securities being bought. There are no takers for Canadian securities though, with even overseas buyers giving them a miss. 

Meanwhile, foreigners shunned Canadian securities, particularly bonds. Total purchases were only $335-million down from $3.1-billion in July as investors, mostly American and British, sold bonds but bought money market paper.

– By Pushpa Sathish, Staff Writer

Foreign inflows into a country have the effect of raising the local currency, (the exception is China which has been accused of artificially devaluing the yuan), so the takeover of Malaysia’s air-conditioner maker by a Japanese firm is seeing the ringgit strengthen. Daikin Industries is buying out OYL Industries Bhd. for the sum of $1.95 billion.

Also contributing to the inflow is the intent of Japan’s Marubeni Corporation to buy 10 percent of Malaysian software vendor Rexit Bhd. The two companies are also planning to create a joint venture to increase sales outside the country. Bloomberg reports:

“These cross-border flows are probably lending a bit of support to the ringgit,”‘ said Ben Simpfendorfer, a currency strategist at Royal Bank of Scotland in Hong Kong. “Talk of mergers with the background of a slightly weaker dollar is helpful, though it’s likely to stall at these levels.”

– By Pushpa Sathish, Staff Writer

Venezuela’s controversial President is making news again. This time, it’s to announce that the country’s economy is strong and healthy, and that there is no need to devalue the national currency, the Bolivar. If you’ve been following the status of the Venezuelan economy, you’d remember that Hugo Chavez had said in April that the bolivar would be revamped into the neuvo bolivar, and would have three zeros knocked off. The new currency was supposed to be introduced into circulation on jan 1, 2008.

In related news, in a move that will benefit small and medium businesses, the President also scrapped import duties and value-added tax on capital goods and goods that were needed for manufacture but not produced indigenously. Business Week reports:

The exchange rate is fixed at 2,150 bolivars per dollar, and Chavez said Wednesday that would remain "identical" throughout 2007.

– By Pushpa Sathish, Staff Writer

Exchange houses are looking to consolidate their holdings through mergers with similar companies. Recent newsmakers in this category include the Chicago Mercantile Exchange Holdings Inc. (CME) and CBOT Holdings Inc. (CBOT), parent companies to the biggest futures exchanges in the United States.

According to recent news and gossip on the industry grapevine:

• CME is eyeing a merger with Germany’s Deutsche Boerse AG, but the latter seems to be more interested in tying up with Euronext NV. The hearsay has managed to push up the share value of CME though.
• CBOT is interested in the London Metals Exchange, but with the London exchange denying reports of a merger, the latter’s stock value has plummeted.
• CBOT is also looking at a merger with Nybot, the New York Board of Trades.
• An agreement between CME and the New York Mercantile Exchange (Nymex) earlier this year has allowed energy products like futures on crude oil, natural gas, heating oil and gasoline to be traded on CME’s Globex electronic platform.
• FXMarketSpace, the world’s first centrally-cleared global foreign exchange market is in the offing as a joint venture between CME and the Reuters Group PLC.
• CBOT has launched the Joint Asian Derivatives Exchange (JADE) along with Singapore Exchange Ltd., to trade futures contracts based on Asian commodities.