Posts Tagged ‘currency’

What Is Maintaining The Ruble-USD Band?

Monday, April 29th, 2024

I’m hardly an expert in foreign currency exchange, but something odd seems to be happening in the Russian Ruble-U.S. Dollar exchange rate.

Obviously, the ruble has lost value because of the extensive sanctions and cutoff from SWIFT following Russia’s launch of its illegal war of territorial aggression against Ukraine. For most of the last year, the exchange rate has bounced from a high of 75 rubles to the dollar to a low of just over 100 rubles to the dollar.

However, in the last month, the ruble-dollar exchange rate has traded within an extremely narrow band between just over 90 and just over 94 rubles to the dollar.

That’s a pretty unusual, and pretty narrow, band to be trading in. The question is who, or what, is maintaining that band. Russia could be intervening to make sure the ruble doesn’t go too much above 94, but it wouldn’t make sense for them (if they’re trying to defend the currency) to be sellers on the other side when the ruble appreciates to 90 or less per dollar. Could it be China, trying to move some of the rubles taken in bilateral trade, or some institutional investor somehow stuck with rubles for two two years, unloading them whenever it hits that peg?

But it’s not just the dollar! We see the same thing with the Pound:

And the Euro:

It even seems true of two of Russia’s remaining big trading partners. The Indian rupee:

The Chinese Renminbi/Yuan:

All seem to be trading within very narrow, oscillating bands.

Is it a data artifact? Other currency exchange sites don’t show quite as obvious oscillation, but all do show trading within that narrow band.

I don’t know what to make of it. I don’t know enough to hazard any more educated guesses than that. But someone seems to be manipulating ruble exchange rates, and I’m not sure why.

If you have any ideas, feel free to share them below.

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Posted in Economics, Foreign Policy | 9 Comments »

Zeihan: The Dollar’s Demise As The Global Currency Is Greatly Exaggerated

Wednesday, January 4th, 2023

“Every few months to couple of years, a new conventional wisdom takes hold that the United States is in its final years, if not final months, and some big political thing is going to happen that is going to dethrone the US dollar as the global currency, and all American power will unwind with that. There is no part of that logic chain that has ever been correct.”

Some takeaways:

  • U.S power is not a result of its position as the global currency, it’s the other way around. The global currency has to be able to impose, by force if necessary, some sort of tax pax on the trading system to allow trade to happen in the first place. And right now the U.S Navy is more powerful than that of all other navies combined by about a factor of seven. And if you consider that the world’s second and third most powerful expeditionary navies are the Japanese fleet and the British fleet, and you throw them in as American for this Force projection factor, you’re now talking in excess of 12 to 1.

  • “Honestly, there’s there’s never been any math there and there’s no danger to the U.S. position from a strategic point of view.”
  • “BRICs is a group of four large developing economies: Brazil, Russia, India and China. It’s a grouping that was put together by some finance guy back in the 2000s, and all he meant by it was ‘Hey, look, these are four big countries with big bond markets we might want to consider trading these as a group.’ That’s all he ever thought about it.”
  • “The leaders of the BRICs countries do get together from time to time. [No]
    meaningful policy has ever come out of it, because these countries don’t really trade. I mean they all trade with China, of course, but they don’t trade with one another, so there’s a reason to caucus with Beijing, but the rest of it is just kind of fluff. Always has been.”

  • “When I see stories about other countries such as South Africa, or Argentina, or now Saudi Arabia starting to join, I’m like ‘Oh, this is really boring.’ Because these countries really have nothing in common.”
  • “The conspiratorial logic goes: If they stop using the U.S. dollar, then the US is doomed. Well they’d have to start using something else, and none of them, none of them, want to use each other’s currencies, because that would give that country a leg up.”
  • “The Russians have always said that the ruble should be the global currency, which makes everyone, everyone laugh, because nobody wants rubles, especially Russians.”
  • Same for the Yuan and the Rand.
  • “If you want to have a Global Currency it has to be huge. It has to be able enough to lubricate the global exchange mechanisms, which at last check was in the tens of trillions. And that doesn’t mean that your currency has to be in the tens of trillions, that means you have to be able to lubricate the exchange of tens of trillions, your currency needs to be even bigger.”

  • Which gets us to probably the single biggest constraint on being a global currency: you have to not care what happens to the value of your currency in any given day, because if there’s a trade surge and demand of your currency goes up, then all of a sudden supply of your currency is plummeted, and you’re dealing with very real economic distortions at home. So your currency has to be so huge that you don’t care that global exchange in it is moving around every day. And that means you also need to be able to run a persistent trade deficit, because you have to be able to provide currency for everyone who wants to trade everywhere at any time, and you cannot sign off on each individual transaction.

  • “That makes the list down to one already.”
  • “Europeans couldn’t do it, because they have to run a trade surplus because their demographics are so aged they will never be net importers again.”
  • “It can’t be the Chinese. The Chinese are the most manipulated currency in human history. They print two to five times as much currency every month as the U.S Fed did at the height of our monetization programs in 2007 to 2008, and then again during Covid. It’s everything that everyone says is wrong with the US dollar is actually wrong with the Yuan by a factor of 10.”
  • “Every time the Chinese start to loosen up their capital controls in an attempt to have a bigger role for their currency internationally, a half a trillion to a trillion dollars of private savings floods out of the country in a matter of months, and they have to slam that window shut again.”
  • Even in times of war, countries tend to use the dominate global currency for international trade, even if issued by their current enemy.
  • “The Russians are under financial constraints right now, sanctions put on them by the Americans the Europeans and others, and so they tried to pull a lot of their petroleum earnings, which comes in in euros and dollars, and they tried to push it into Chinese yuan as kind of like a stick it to the West. Well, a few months later they tried to then pull it out, and the Chinese went like ‘Well, no, we really don’t want these Yuan back.’ And so the Russians just lost tens of billions of dollars.”
  • In a post-globalist economy, American dollars provide a handy hedge against regional hegemons.
  • “There’s no shortage of people who don’t like Americans, who have no sense of math or history, who are always going to trot this up every few months, and it means as little today as it did then.”

    • That means you too, Zerohedge…

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    Posted in Foreign Policy, video | 12 Comments »