Tag: currency

By Kaye Wiggins for Bloomberg / Fin24 

Barclays, Citigroup, HSBC, JPMorgan and three other banks are set to be fined by EU antitrust regulators in coming weeks for rigging the multi-trillion dollar foreign exchange market, two people familiar with the matter said.

JPMorgan Chase & Co. and UBS Group AG are among five banks being sued over allegations of foreign-exchange rigging in a class-action lawsuit seeking more than £1bn ($1.2bn or just over R17bn).

Barclays, Citigroup and Royal Bank of Scotland Group are also among the targets of the United Kingdom suit that will say pension funds, asset managers, hedge funds and corporations lost out because of market manipulation between 2007 and 2013 and should be compensated.

The lawsuit centers on collusion on foreign-exchange trading strategies, for which the European Commission fined Barclays, RBS, Citigroup, JPMorgan and Mitsubishi UFJ Financial Group, a total of €1.07bn in May. UBS escaped a fine because it was the first to tell regulators about the collusion.

JPMorgan and UBS declined to comment. The other banks didn’t immediately reply to calls or emails seeking comment.

Traders ran two cartels on online chatrooms, the European regulator said. Many of them knew each other, calling one chatroom “Essex Express n’ the Jimmy” because all of the traders but one met on a commuter train from Essex to London. Other names for rooms were the “Three Way Banana Split” and “Semi Grumpy Old Men.”

It’s the latest development in a case that’s already triggered regulatory probes around the world, and billions of dollars in fines as well as $2.3bn (R32.69) in settlements in the United States last year.

“The message is really clear – we want markets to work fairly,” said Michael O’Higgins, a pension fund chair who’s spearheading the UK suit. “People involved in markets will argue the case for free markets. They’ve got to make sure they’re fair as well as free.”

The case will be filed in the Competition Appeal Tribunal in London by Scott+Scott Europe, whose US arm Scott+Scott Attorneys at Law led the class action that ended with $2.3bn in settlements.

O’Higgins, who chairs the Local Pensions Partnership, a UK public sector pension fund, and the Channel Islands Competition & Regulatory Authorities, said that on a conservative estimate the banks may have to pay out £1bn (R17.5bn) if he wins.

The lawsuit could take three to five years, he said, and thousands of institutional investors could be in line for payouts if it succeeds.

It’s one of the first cases to be brought under 2015 UK legislation that paves the way for US-style collective actions. The Consumer Rights Act rules mean any UK based investors who lost out will automatically become part of the claim. Investors based outside of the UK – except those in the US, Canada and Australia – can opt in.

Zimbabwe introduces new currency

Source: BBC

“Nobody knows what it is,” is the verdict of Zimbabwe’s former trade minister and now opposition politician Nkosana Moyo.

He was talking about what appears to be a new currency in the country.

It has been introduced over the last few days but its impact is not yet clear.

Why is it needed?
Zimbabwe has a troubled history with currency.

In 2009 it ditched the Zimbabwe dollar and adopted the US dollar after hyperinflation destroyed its value. At its height prices were almost doubling every day and the reserve bank printed notes worth 100tn Zimbabwe dollars to try and keep up.

But because more US dollars were leaving the country – in the form of payments for exports – than coming in, US dollar cash was in short supply. This led to long bank queues as people struggled to get their money out.

In 2016, the government introduced bond notes and coins, which were supposed to be worth the same as the US dollar, to make up for the cash shortage.

But no-one had faith that they were equivalent and, on the black market, bond notes have lost value against the dollar.

And now the government has introduced the Real Time Gross Settlement (RTGS) dollar, which is being described by some as a new currency.

RTGS dollar?
It’s not a phrase that exactly rolls off the tongue, but the initials are familiar to Zimbabweans who have been using them to describe money that has been electronically transferred into their bank accounts.

As well as paying for goods in US dollars, Zimbabweans have been able to use other foreign currencies such as the South African rand, plus bond notes, debit cards drawing on bank accounts and money stored on a mobile phone app.

But each of them had a different exchange rate, meaning that customers were sometimes charged different prices depending on what payment method they chose.

The RTGS dollar is supposed to bring together bond notes and debit card and mobile money payments to make sure that they are all worth the same.

Significantly, the government has given up on the pretence that the bond note and the US dollar have the same value. Now it is saying that the value of the RTGS dollar against the US dollar will be set by the market.

What makes a currency a currency?
While business journalists and commentators are saying that there is a new currency, the government has not used this phrase.

The Zimbabwe dollar has such a tarnished history that the government is reluctant to be seen to be returning to this.

At its simplest, a currency is something that is widely accepted as a means to buy goods and services.

From now on the government wants things priced in RTGS dollars, rather than US dollars, and people should be able to use the various payment methods denominated in RTGS – debit cards, bond notes and mobile phone money – to purchase them.

So it feels like a currency but there are no plans to have notes and coins with “RTGS dollars” written on them and you cannot use them outside the country.

How much is an RTGS dollar worth?
The government has said it wants the price of the RTGS dollar to be determined by the market.

It initially suggested that it should trade at 2.5 RTGS dollars to the US dollar, but this was significantly less than the black market rate for the bond note, which was selling at more than 3.5 to the dollar.

If the RTGS dollar is truly allowed to float without intervention then the black market should be eliminated altogether.

The government hopes that it will make things simpler as there won’t be different prices quoted according to the various currencies and payment methods.

It also hopes that prices will stay the same or even decline as stability and predictability is brought into the market.

Will this solve Zimbabwe’s problems?
Zimbabwe has been hit by rising inflation and increasing levels of government debt for many years.

But if the RTGS dollar is the solution, then the government is “misdiagnosing the problem”, opposition politician Mr Moyo says.

He argues that poor economic management is at the heart of the problem, saying that government expenditure needs to be reined in.

But Finance Minister Mthuli Ncube insists that austerity measures he introduced in last year’s budget are working and government revenue is increasing.

As long as the government does not try to manage the RTGS dollar exchange rate, then this is a step in the right direction, says the chief economist at Renaissance Capital, Charlie Robertson.

But given the history that Zimbabwe has with currencies, it will take a lot to restore people’s trust, he adds.

Source: IOL 

The Competition Commission in South Africa said it has noted an agreement between Standard Chartered Bank and the New York State Department of Financial Services where Standard Chartered pleaded guilty to currency manipulation.

The Competition Commission said in a statement: “The Competition Commission has noted a consent agreement, which subsequently became a court order, between Standard Chartered Bank and New York State Department of Financial Services. In the consent order, Standard Chartered pleaded guilty to currency manipulation which included the South Africa Rand (ZAR) between 2007 and 2013. This is captured on pages 9 and 10 of the court order.”

The Commission said it would consider the impact of the order on the ongoing forex litigation with the banks in South Africa.

The statement continued: “In February 2017 the Commission referred to the Tribunal for prosecution a collusion case against Bank of America Merrill Lynch International Limited, BNP Paribas, JP Morgan Chase & Co, JP Morgan Chase Bank N.A, Investec Ltd, Standard New York Securities Inc., HSBC Bank Plc, Standard Chartered Bank, Credit Suisse Group, Standard Bank of South Africa Ltd, Commerzbank AG, Australia and New Zealand Banking Group Limited, Nomura International Plc., Macquarie Bank Limited, ABSA Bank Limited (ABSA), Barclays Capital Inc, Barclays Bank plc (Respondents).

“The Commission investigated a case of price-fixing and market allocation in the trading of foreign currency pairs involving the South African Rand since April 2015. The Commission found that from at least 2007, the respondents had a general agreement to collude on prices for bids, offers and bid-offer spreads for the spot trades in relation to currency trading involving US Dollar / Rand currency pair.

“Further, the Commission found that the respondents manipulated the price of bids and offers through agreements to refrain from trading and creating fictitious bids and offers at particular times. Citibank N.A. pleaded guilty and reached a settlement agreement with the Commission and agreed to pay an administrative penalty of R69 500 860. Citibank N.A. undertook to cooperate with the Commission and avail witnesses to assist the prosecution of the other banks.”

The commission said that since February 2017, it has been engaged in protracted litigation with the rest of the banks, including Standard Chartered Bank, on pre-trial issues such as jurisdiction of the South African authorities and disclosure of the Commission’s evidence.

Rand rallies as Ramaphosa leads

The rand rallied on Tuesday, strengthening to below R13.50 to the US dollar as the race for the ANC president enters the final stages.

Deputy President Cyril Ramaphosa is now firmly in the lead after winning backing from most ANC branches to succeed President Jacob Zuma as ruling party leader.

READ: Ramaphosa has edge, but leadership victory not guaranteed
RMB currency strategist Ilke van Zyl said in a morning note that the positive turn in local politics could buoy the rand further.

The local unit has clawed back more than a rand since it breached R14.50/$ just over two weeks ago on plans by President Jacob Zuma to push through free higher education.

By 09:10 the rand was trading 0.4% firmer at R13.46/$ from an overnight close of R13.52/$. The unit was still trading in the high R13.70s on Monday.

“Local politics are the main reason for the significant rally in the rand this morning as the race for ANC president enters the final stages. Kwazulu-Natal endorsed Dlamini-Zuma with 433 (69%) votes vs. 193 (31%) votes for Ramaphosa. But this was more than neutralised by Limpopo that crowned Ramaphosa with 391 votes (79%) vs. Dlamini-Zuma’s 104 (21%).

“Ramaphosa is now firmly in the lead and has the backing of five provinces with a total of 1 862 votes. Dlamini-Zuma has four provinces behind her and a total of 1,309 votes. Simplistically, this is a 59/41 percent split in favour of Ramaphosa,” she said.

Van Zyl however said it is important to remember that not all of the branches were allowed to vote and an accreditation of delegates will take place on the first day (the 16th) of the conference.

“Either way, this gap is very unlikely to be closed.”

South Africa’s GDP growth numbers are also due for release on Tuesday, with economists expecting an easing to 1.7% in quarterly growth from 2.5% recorded in the second quarter.

Van Zyl reckons markets are already pricing in low growth and the release should have minimal impact on the currency.

Source: Fin24 

Rand surprises market to dip below R13/dollar

The rand surprised the market with a strong push to below R13/$ on Tuesday afternoon as the unit capitalised on a weaker dollar.

Earlier on Tuesday the rand continued its previous session’s slide to reach R13.12 to the greenback as the local unit faced more upside pressure from the North Korean missile launch.

By 16:47 the rand was trading at R12.99/$, 0.32% firmer than its previous close. It strengthened to R12.93/$ earlier in the session.

RMB currency analyst John Cairns said in his daily note to clients that the latest missile launch was North Korea’s most provocative ballistic test yet, as the missile flew over the northern Japanese island of Hokkaido, generating warnings for citizens to take cover.

“Given that a war between Japan/Korea/US and North Korea would be devastating — and generate R2.00+ big figure rise in USD/ZAR — one can understand the market’s nervousness.

“However, the problem with the catastrophe trade is that there is only a very small chance of a massive market event and a near certain chance that nothing will happen. Betting on the catastrophe therefore is almost always going to generate a loss, which is to say that, as with all the previous missile launches, expect risk aversion to die away rapidly, and for risk assets to recoup their losses,” Cairns said.

Commenting on the latest move, TreasuryOne told Fin24 there is no particular reason for the rand’s sudden strength.

“It surprised the market. The rand is capitalising on a weaker dollar and the North Korea missile scare has fallen into the background.”

TreasuryOne dealer Andre Botha earlier said North Korea’s missile launch early on Tuesday will only serve up more geopolitical tension, and more risk-off behaviour can filter into the market which can stop the rand from breaking through the R13-level against the US dollar.

Source: Fin24

Plastic five pound notes are about to be unveiled by the Bank of England which will be impossible to tear, can go through the wash and even survive having a glass of wine poured on them.

The polymer £5 note repels dirt and moisture and is designed to last for about five years, compared with between 18 months and two years for the cotton paper version which should save the Bank of England about £100-milliom over 10 years.

The design is being unveiled later this week while the notes themselves will not be released until September when about 44m of the notes will come into circulation, followed by plastic versions of other notes.

The new fiver, which will be 15% smaller than the current note, will feature Winston Churchill who replaces the 19th Century prison reformer Elizabeth Fry.

A plastic £10 note featuring author Jane Austen will be released next summer and a £20 note with a picture of the artist JMW Turner will be launched by 2020.

Victoria Cleland, 46, the Bank’s chief cashier, told the Sunday Times, the new notes were getting a good reaction from members of the public who had seen them.

She says: “They often says, ‘Wow, that’s really cool.’ You don’t often get ‘cool’ and ‘the Bank of England’ in the same sentence. They are more modern and I think they’re beautiful.”

But despite their resilience, the Bank is not encouraging anybody to give the new notes a spin.

Cleland says: “Yes, you can put them through washing machines but we’re not encouraging people to do that. We didn’t design them to go into washing machines: it is a fortunate by-product that they are more resilient [when washed].

“But clearly if you keep doing it at high temperatures you are going to destroy the poor note.”

Governor Mark Carney, revealed plans for polymer notes 11 weeks after joining the Bank of England in 2013.

He was head of the Bank of Canada when it introduced them in 2011 but the launch was overshadowed by rumours that the notes were scented after Canadians became convinced they could smell maple syrup on the money.

The Bank of England, which dealt with 240 000 counterfeit notes last year, hopes the new notes will be much more difficult for fraudsters to copy successfully.

By Nicola Bartlett for www.mirror.co.uk
Image credit: www.mirror.co.uk

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