Forex Reader

– By Pushpa Sathish, Staff Writer

China is sticking to its guns – the People’s Bank of China has decided to keep the yuan stable, even as the calls to let it appreciate keep pouring in. The United States has been repeatedly demanding that China let its currency rise and correct the trade imbalance – the country has a trade deficit of $229 billion with China.

The latest to join the bandwagon is Thailand; China’s dogmatic stance is hurting smaller economic nations that depend on their exports for growth, according to Thai Finance Minister Pridiyathorn Devakula. The chief of the country’s central bank imposed tight controls on the baht after it surged to a nine-year high against the US dollar following a spate of foreign investments.

The minister, who along with the Thai central bank came in for some harsh verbal treatment from internal and external investors, justified his decision as a measure to protect the small country’s economic growth prospects. He raised a very valid point – that if China and other export competitors allowed their currencies to appreciate at a similar level as the baht, these controls would not be necessary.

A visit to China by the U.S. Treasury Secretary Henry Paulson and the U.S. Federal Reserve Chairman Ben Bernanke earlier this month failed to elicit a positive response, with China saying that it would consider flexibility for its currency, but not committing itself to any schedule or deadlines.

– By Pushpa Sathish, Staff Writer

There’s been a lot of talk about China’s vast foreign exchange holdings, and never-ending debates on the best use that it can be put to. While analysts and economists are calling for a decrease in the dollar amount and a drop in the U.S. Treasuries, the latest suggestion comes from the country’s vice president – Zeng Peiyan feels that a part of the $1 trillion should be used to strengthen China’s strategic energy reserves.

China needs to consolidate its mid- and long-term plans for its coal industry, besides expediting the process of exploring for oil, natural gas and other resources like uranium, said Zeng in a report to China’s legislature body, the Standing Committee of the National People’s Congress.

– By Pushpa Sathish, Staff Writer

Dirty money and laundering issues are rearing their ugly heads in Uganda. The African country recently made news when the Barclays Bank announced that it was severing all associations with foreign exchange bureaus in the nation. Accordingly, accounts with all 92 bureaus will be closed by December 29.

While the bank is not offering any details on why the move is being made, sources say that some of the forex bureaus have been involved in the illegal flow of money in to and out of the country, and in its subsequent laundering.

On the other side of the coin, the bureaus are accusing Barclays of closing down all accounts with them because the bank sees them as direct competition. But commercial bank sources are sure that the bank has certain proof of illegal activities, and that it wants no part of them.

– By Pushpa Sathish, Staff Writer

Did you know that the United States is the only country among the 180 that use paper money to print all its bills in the same color, size, and shape? While some of you may argue that standardization is a good thing, the visually-impaired community in the country does not seem concur. It’s difficult for blind people who value their independence to distinguish between the different denominations without relying on the goodness and honesty of salespeople and store clerks.

So it was only natural that the American Council for the Blind asked that the bills either be made in various sizes or that changes be made to the texture to distinguish between one bill and another. But with the Justice Department appealing against a ruling that called for such changes, the Bush government has been coming in for considerable flak from the council.

The callous attitude of lawyers representing the Justice Department has only fueled the fire, their statements asking the blind to use special reading machines or credit cards not helping the situation at all. What are the options open to those who are not eligible for credit cards and cannot afford the machines which cost $350, asks the council. And with the government willing to draw from the exchequer to introduce anti-counterfeiting measures into the bills, why this hesitation, it asks – valid points raised in deed.

The weekly statistical supplement of RBI dated 8 December 2006, has reported that the Forex reserves have reached $ 175.489 billion as on 1 December 2006. This figure is up by $ 2.707 billion on 24 November 2006. On 24 November 2006 the Forex reserves had been $ 172.78 billion.

Rise in foreign currency and assets and a rise in reserve position in the IMF are being seen as the possible reasons for the growth in Forex reserves. During the same time frame, foreign currency and assets grew to $ 168.44 billion. This is a rise of $ 2.38 billion. The special drawing however remained at its previous level - $ 1 Million. Myiris.com reports:

Foreign currency and assets during the week rose by USD 2.38 billion to USD 168.44 billion. Foreign currency assets expressed in USD terms include the effect of appreciation/depreciation of non-US currencies (such as euro, sterling and yen) held in reserves. The reserve position in the IMF deteriorated by USD 103 million to USD 549 million during the period under consideration.”

The Central Bank said that the Gross international reserves at the end of November 2007 grew to a record level of $22.49 billion. This is even higher than the reserves of October end that stood at $22.31. The reserves comprise earnings from the central bank’s foreign exchange operations and investments abroad as well as from a bond issue of the government’s National Power Corp. Proceeds of a program loan from the Asian Development Bank also contributed to the reserves.

The bank feels that the reserves are adequate to last for 4.5 months’ worth of imports of goods and also for payments of services and income. The reserves account for nearly 4.1 times the country’s short-term external debt based on original maturity. The reserves also helped the central government to make early payments for Brady Bonds. The value of these was $ 165 million. The INQ7 Networks reports:

Governor Amando Tetangco of the central bank, Bangko Sentral ng Pilipinas, previously said the reserves could reach $24 billion at the end of 2007, compared with $22 billion projected this year. The reserves have risen 21.7 percent from an end-2005 level of $18.49 billion.”

– By Pushpa Sathish, Staff Writer

More on the metal that glitters – the Shanghai Gold Exchange (SGE) is hoping to be able to develop gold derivative products, subject to the approval of certain government regulatory agencies, said Tong Gang, an official of the exchange which trades spot gold, silver and platinum and spot-deferred gold and silver. The Shanghai Securities News has quoted Shen Xiangrong, the chairman of the exchange’s board, as stating that “the time is ripe to develop gold derivatives.” Tong Gang explained that the derivatives would be in the form of futures, options, bonds and funds.

SGE, which comprises 128 domestic members including jewelers, producers and commercial banks, is contemplating granting foreigners membership rights to the exchange. In an attempt to increase liquidity, the exchange is also considering lowering the individual investment threshold. 

– By Pushpa Sathish, Staff Writer

India would do well to increase the gold it holds as part of its foreign exchange reserves, according to S.S. Tarapore. The former director of the country’s central bank, the Reserve Bank of India, said that it was high time the country’s policy makers changed their perception that transactions in gold was a bad thing as opposed to dealings in US Dollars, Euros, Yen and Pound Sterling. He stressed on the long-term advantages of increasing the proportion of gold held, and plumped for raising the percentage from the current 3.6 percent to at least 10 percent of the total reserves. The Hindu reports:

Tarapore also said there should be a discussion paper prepared on gold, which should put out in fairly simple terms the costs of the present passive policy and what a proactive gold policy would deliver if the RBI were to undertake two way transactions in gold.