Forex

China Risks Eroding Confidence in Currency – Benjamin Fuchs

Published

7 years ago

January 6, 2017

Trader Who Bet on Gradual Yuan Decline Now Sees Steeper Drop

Last year, Benjamin Fuchs’s $2 billion hedge fund prospered by betting against a sudden yuan devaluation. Now, he says forces are lining up that are increasing the odds of steep declines.

By repeatedly tightening capital controls, China risks eroding confidence in its currency, said Fuchs, chief investment officer at BFAM Partners (Hong Kong). At the same time, the dollar’s advance against the yen and other currencies is increasing competitive pressure on China to let the yuan depreciate, he said in an interview.

China’s August 2015 devaluation threw global markets into turmoil and triggered a surge in wagers a follow-on move was imminent. BFAM’s bet that yuan weakening would be more gradual helped power the fund to an estimated 17.5 percent gain last year, said a person with knowledge of the matter. Now, however, the increased pressure on Beijing to allow bigger exchange-rate moves is partly self-inflicted, according to Fuchs.

“We’re starting to see more and more of a negative cycle being created potentially by China itself with aggressive capital controls,“ said Fuchs, a former Lehman Brothers Holdings Inc. trader. China’s attempts to curb outflows are “just making people want to take money out quicker, and make companies change their behavior.”

Yuan Bounce

Seeking to fight off yuan bears, Chinese authorities in the past week have taken steps to support the exchange rate, including encouraging state-owned enterprises to sell foreign currencies, according to people with knowledge of the matter. The yuan gained 1 percent on Thursday in Hong Kong, capping the biggest two-day advance in data going back to 2010. Meanwhile, a jump in the overnight deposit rate in the city made bearish yuan trades more costly.

Pinpoint Asset Management, a $1.5 billion Hong Kong-based hedge fund firm, expects the recent yuan surge to be short-lived, forecasting a 3 percent to 5 percent annual decline over the next three years, Jennifer Wong, its managing director of investor relations, said in an interview. Pinpoint’s China fund rose 2.6 percent last year.

The offshore yuan exchange rate fell 0.5 percent to 6.8224 a dollar as of 11:06 a.m. in Hong Kong Friday.

Donald Trump’s election as the next U.S. president in November has fanned anticipation of increased fiscal spending and tax cuts, driving a dollar rally. Meanwhile, as China’s capital outflows have approached $1.7 trillion since the start of 2015, according to Bloomberg Intelligence estimates, Chinese policymakers have made it harder for local firms to buy overseas assets and take the yuan offshore. They have also repeatedly tightened curbs on citizens’ ability to move money abroad.

Hard Landing

Some investors were betting on a large yuan devaluation last year as concern mounted the Chinese economy was headed for a hard landing. BFAM has made money taking the opposite side of the most bearish wagers, anticipating a more gradual depreciation. The yuan slid 6.5 percent against the greenback in the onshore market and 5.8 percent offshore last year.

Fuchs’s trades have made BFAM a standout among Asia’s hedge funds, who eked out an average 1.1 percent gain last year, according to preliminary data from Singapore-based Eurekahedge. BFAM returned 11 percent in 2015. Fuchs declined to comment on fund performance.

The yen has tumbled 8.6 percent since the U.S. election, while the yuan has slipped 1.2 percent onshore and is little changed offshore. The Korean won weakened more than 3 percent and the Malaysian ringgit depreciated 5.5 percent.

Fuchs expects long-term dollar-interest rates to rise much faster than short-term rates over the coming years, a phenomenon known as a steepening yield curve. As the Federal Reserve accelerates the pace of rate increases, that could put pressure on commercial real estate, he said. Life insurers and pension funds that have invested heavily in commercial property, as well as banks that lend to such projects, may get squeezed because rents won’t rise quickly enough to compensate for higher long-term interest rates, according to Fuchs.

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Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Dollar to Naira Black Market Today, April 19th, 2024

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

11 hours ago

April 19, 2024

Samed Olukoya

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,020 and sell it at N1,010 on Thursday, April 18th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined slightly when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,100
Selling Rate: N1,090

Naira

Naira’s Recent Gain Reflects Policy Direction, Says CBN Chief Olayemi Cardoso

Published

1 day ago

April 18, 2024

Samed Olukoya

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has explained that the recent surge in the Naira is a testament to the positive direction of government policies rather than active intervention to defend the currency’s value.

Addressing attendees at the spring meetings of the International Monetary Fund and World Bank in Washington, Governor Cardoso underscored that the CBN’s intention is not to artificially prop up the Naira.

He clarified that the fluctuations observed in the country’s foreign exchange reserves were not aimed at defending the currency but rather aligning with broader economic goals.

Over the past month, the Naira has experienced a notable uptick in value against the dollar, signaling a reversal from previous declines. Data from Bloomberg reveals a 6.4% decrease in liquid reserves since March 18, coinciding with the Naira’s rebound.

Despite this decline, Cardoso pointed out that around $600 million had flowed into the reserves in the past two days, reflecting confidence in the Nigerian market.

Governor Cardoso articulated the CBN’s vision of a market-driven exchange rate system, emphasizing the importance of allowing market forces to determine exchange rates through willing buyers and sellers.

He expressed optimism about a future where the central bank’s intervention in the foreign exchange market would be minimal, except in extraordinary circumstances.

The recent resilience of the Naira follows a period of volatility earlier in the year, marked by a substantial devaluation in January. Since then, the CBN has implemented measures to stabilize the currency, including monetary tightening and initiatives to enhance dollar liquidity.

Cardoso highlighted the transformation in market sentiment, noting that investors now perceive Nigeria’s central bank as committed to stabilizing inflation and fostering economic stability.

As Nigeria continues its journey toward economic recovery and stability, Cardoso’s remarks provide insight into the central bank’s strategy and its impact on the country’s currency dynamics.

Naira

Dollar to Naira Black Market Today, April 18th, 2024

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

2 days ago

April 18, 2024

Samed Olukoya

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,050 and sell it at N1,040 on Wednesday, April 17th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.