Posted on 08/12/2015 4:15:35 AM PDT by expat_panama
The dollar fell 0.6 percent against a basket of currencies on Wednesday, coming under pressure as Treasury yields dropped on doubts over whether the U.S Federal Reserve will raise interest rates in the wake of China's devaluation of the yuan.
The yuan extended its losses, dragging the growth-linked Australian and New Zealand dollars to six-year lows with it, while another set of disappointing Chinese data bolstered safe-haven currencies such as the yen.
The euro, meanwhile, rose, helped by the unwinding of euro-funded carry trades in the yuan EURCNH=. The single currency hit a one-month high of $1.11385 EUR=EBS, up 0.8 percent on the day. The dollar index fell to 96.691 .DXY, while the greenback shed 0.5 percent to trade at 124.42 yen JPY=.
"There are some question marks being raised about the timing of the Fed hike," said Niels Christensen, FX strategist at Nordea. "The euro is squeezing higher against the dollar, as Treasury yields drop."
In China, the spot yuan fell to 6.44 per dollar, its weakest since August 2011, after the central bank set its daily mid-point reference at 6.3306, even weaker than Tuesday's devaluation. The currency fared worse in international trade, touching 6.5888 yuan per dollar, its lowest since early 2011 CNH=.
Foreign exchange traders in Shanghai said Chinese state-owned banks were selling dollars on behalf of the central bank, which was intervening to keep the yuan CNY=CFXS around 6.43 against the dollar.
The latest PBOC moves came after it surprised markets on Tuesday by aggressively lowering its guidance rate, pushing the yuan down nearly 2 percent.
The Aussie, widely considered a more liquid proxy for China plays, AUD=D4 was trading flat at $0.7297, after plunging as low as $0.7217, its lowest since mid-2009. The New Zealand dollar also fell ...
(Excerpt) Read more at reuters.com ...
Agreed. The Fed will continue to hint that there’s going to be a rate hike, but they will not actually do it.
The excuses will change. The inaction will continue.
Huh. Inaction by the federal government. I can live with that.
I’m not convinced he is actually running for president. There was a story on here yesterday about how frugal he was on advertising and he won’t even put money up for an effort to get on the ballot in all the states. So far he hasn’t spent much and it is hard to turn to a channel that he is not on or they are not talking about him. Stalking horse or glory hound but not serious.
While that’s profoundly true, let’s not forget that the Federal Reserve is not part of the government: anymore than ‘Fed Ex’ is. It’s a privately-owned company. My fault for using the word “Fed” loosely.
In this case the FRB is hand-in-hand with the literal Federal Government. They’ve printed trillions of dollars, diluting the buying power of all dollar-holders, punishing savers and hollowing out the middle-class.
If the FRB were to raise rates, they would be rolling back their previous distortion of the market. But instead they will continue to maintain today’s ultra low rates.
It’s a free media campaign and he seems readymade to peel off a segment of the GOP vote. That only benefits Democrats. His constant hints that he’ll run third party if he’s not treated ‘fairly’ sounds like some SJW, not a Republican Presidential candidate.
Sadly, too many here are falling over themselves for Trump. Keep the positions and change his name to Romney, McCain or Graham and they’d see this for what it is: a conversion of convenience (especially for Hillary!)
Nope. Part of the government.
The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution.
Just because the Federal Government has endorsed the FRB and given them status, it doesn't change the fact that they are a privately-owned organization.
Yes, banks own "shares". I put it in quotes because the "shares" are totally unlike shares traded on an exchange. They pay a 6% dividend, although it would more properly described as an interest payment like you would receive from a bond.
The 12 regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized similarly to private corporations--possibly leading to some confusion about "ownership." For example, the Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.
Further evidence that they are part of the government.....
Release Date: January 9, 2015
For release at 11:00 a.m. EST
The Federal Reserve Board on Friday announced preliminary unaudited results indicating that the Reserve Banks provided for payments of approximately $98.7 billion of their estimated 2014 net income to the U.S. Treasury. Under the Board's policy, the residual earnings of each Federal Reserve Bank are distributed to the U.S. Treasury, after providing for the costs of operations, payment of dividends, and the amount necessary to equate surplus with capital paid-in.
The Federal Reserve Banks' 2014 estimated net income of $101.5 billion was derived primarily from $115.9 billion in interest income on securities acquired through open market operations (U.S. Treasury securities, federal agency and government-sponsored enterprise (GSE) mortgage-backed securities (MBS), and GSE debt securities). Operating expenses of the Reserve Banks, net of amounts reimbursed by the U.S. Treasury and other entities for services the Reserve Banks provided as fiscal agents, totaled $3.6 billion in 2014. In addition, the Reserve Banks were assessed $711 million for the costs related to producing, issuing, and retiring currency, $590 million for Board expenditures, and $563 million to fund the operations of the Consumer Financial Protection Bureau. The Reserve Banks had interest expense of $6.9 billion associated with reserve balances and term deposits held by depository institutions, and recorded foreign currency translation losses of $2.9 billion that result from the daily revaluation of foreign currency denominated asset holdings at current exchange rates.
Additional earnings were derived from income from services of $435 million, and net income of $101 million attributable to the consolidated limited liability companies that were created in response to the financial crisis. In 2014, statutory dividends totaled $1.7 billion and $1.1 billion of net income was used to equate surplus to capital paid-in.
http://www.federalreserve.gov/newsevents/press/other/20150109a.htm
"Shareholders" received $1.7 billion, but the US Treasury received $98.7 billion.
Please tell the thread how the shareholding banks aren’t making a profit if their membership earned them 1.7 billion dollars in 2014.
Currency war?
Whoa, thanks for the headsup!!! I had no idea that Federal Express was set up and assigned its mission by act of congress, that its CEO and board of directors are all named by the president and approved by the senate, and that the company is required submit regular reports and audits to the Treasury Dept. and each house of congress.
Sounds just like GM
We’re agreed then that the FRB is a profit-making organization.
The members get a lot from their cosy relationship with Government. They get a statutory dividend. They get access to ultra-cheap loans. Since 2008 they get paid interest on their excess reserves. And they also get to vote for their regulators (!)
Ask Federal Express if they would like a statutory dividend and to be an insider in the largest bond manipulation monopoly on earth.
You mean they don't have one? Wait a sec, I thot FedEx was the same as the FedReserve. Which is it?
From what I've been able to gather a lot of folks much smarter and more powerful than u and me are thinking that places like say, India might also follow suit on the belief that they could get whatever advantage that China's supposed to be looking for here.
This isn’t as perplexing as you’re making it out to be.
Fed Ex is a privately-owned company that doesn’t have a particularly cosy relationship with the Government.
The FRB is a privately-owned company that enjoys an extremely cosy relationship with the Government.
GM and Solyndra are in awe.
Under normal circumstances, the Federal Reserve makes a profit. Even though that is not its purpose.
I mean it would take Obama-level stupidity to run a Federal agency that creates electronic money out of thin air (and pays 0.25% interest on it) and that can print FRNs (and pays 0% interest on them) and uses the funds to buy guaranteed bonds that pay 2%-4% interest and not turn a profit.
They get a statutory dividend.
Absolutely! $1.7 billion last year.
They get access to ultra-cheap loans.
You bet! Currently 0.75%.
Since 2008 they get paid interest on their excess reserves.
They get paid on ALL their reserves.
And they also get to vote for their regulators (!)
Some of them. You're right!
If my privately owned company paid me a dividend of less than 1.7% of net earnings while the US Treasury received 98.3% of net earnings, I'd double check my definition of "privately owned".
The FRB is a privately-owned company that enjoys an extremely cosy relationship with the Government that it is a part of.......
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