Malaysia’s Ringgit Sinks to 9-Year Low vs. Dollar

A selloff in some emerging-market currencies took another leg down on Monday, fueled by the prospect of higher interest rates in the U.S.

Malaysia’s currency, the ringgit, plunged to a nine-year low against the dollar before reversing course later in the day. Exacerbating weakness in the ringgit is heightened scrutiny of a debt-laden state investment fund that has run into difficulty finding cash to meet its obligations.

Other emerging-market currencies have also faltered in recent days. On Monday, Turkey’s lira tumbled to a record low against the greenback after the country’s ruling party failed to secure a majority in national elections. Following last week’s stronger-than-expected U.S. jobs report, the Indonesian rupiah hit its weakest level against the buck in almost 17 years, Mexico’s peso hit a record low against the dollar and South Africa’s rand plumbed its lowest level since late 2001, according to CQG.

The employment report solidified the expectations among many investors that the Federal Reserve will raise the short-term benchmark interest rate in the U.S. sometime this year—possibility as early as September. Higher rates dim the allure of emerging-market assets, and could potentially lead to losses as money managers recalibrate how much yield they should demand from the sector’s relatively risky stocks, bonds and currencies.

The prospect of even more financial-market turmoil spurred by a Fed rate increase has put officials in developing countries on the defensive as they seek to head off potentially disruptive capital outflows.

“Emerging-market currencies, including the ringgit, continue to be affected by uncertainties in the external environment,” Zeti Akhtar Aziz, Malaysia’s top central banker, told The Wall Street Journal in a written response to questions. “In this environment, the ringgit is now trading at levels that are not reflective of the fundamentals of the Malaysian economy.”

Last week, 1Malaysia Development Bhd., a state investment fund, came under investigation by the central bank in connection with its offshore borrowings and foreign investments. Late Monday, 1MDB said it had repaid some of its debt—a $975 million loan to a syndicate of international banks—and was committed to reducing debt levels.

Naira drops, as BVN paralyses forex market

By Babajide Komolafe

LAGOS — Activities at the retail segment of the official foreign exchange market were grounded, yesterday, as end users avoided bureaux de change (BDCs), to avoid submitting their Biometric Verification Number (BVN) for foreign exchange transactions.

This, however, resulted in sharp increase in demand for dollars at the black market, prompting the naira to depreciate to N230 per dollar from N225. 

Recall that the Central Bank of Nigeria (CBN) made the BVN a criteria for sale and purchase of foreign exchange by banks and bureaux de change (BDCs) effective  November 1.

Vanguard investigation, however, revealed that instead of  foreign exchange end users submitting their BVN to BDCs as mandated by the CBN, most of them moved to the black market for their foreign exchange needs. This in turn increased demand in the market, prompting the parallel market exchange rate to rise to N230 per dollar from N225 at the close of business on Tuesday.

Confirming this development to Vanguard, Mr. Harrison Owoh, Chief Executive Officer, H.J Trust BDC said that “most of the customers were not willing to submit their BVN due to fear of what it might be used for. This has slowed down sales  of forex by BDCs because we can’t sell without obtaining the BVN.”

An Abuja-based BDC manager, who spoke to Vanguard on condition of anonymity said that the problem was severe in Abuja, with BDCs having difficulty selling the dollars purchased from the CBN, last week.

“As I am talking to you, most BDCs in Abuja may not take dollars from CBN today (yesterday) because we  have not sold the ones we bought last week. The customers do not want to submit their BVN for security reasons. They are patronising the black market, that is why the rate has gone up sharply, and I can tell you, the rate might rise higher if the situation persists.”

President of Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, however, blamed the situation on lack of adequate awareness on the part of the CBN before implementing the policy. He said that while ABCON, as a partner in progress with the CBN supports the use of BVN as criterion for foreign exchange transactions, the association had, however, called the attention of the apex bank to the need to delay implementation to allow massive publicity to create awareness among the populace.

“We had predicted what is happening now, that in the absence of adequate awareness, patronage will shift to the black market, leading to depreciation of the Naira in the market”, he said.

Submitting BVN not security threat—CBN

Director, Corporate Communications Department of CBN, Alhaji Ibrahim Muazu wondered why anybody should be afraid of submitting BVN for transactions, adding that there was no threat in giving BVN for foreign exchange transactions.

According to him: “This probably has to do with people with illicit flows, and not for fear of the BVN itself.  And for people with illicit flows, they are avoiding documentation, the way they avoid the banks.

“To us, if not for the likely impact on the black market, it is a good development because it means the foreign exchange market is now demand driven. For example, if you go to the banks for ‘Form A’ foreign exchange transactions, it requires more than the BVN.

Submitting BVN for transactions is not a security threat. The BDCs cannot access the account details of their customers; they would just have the BVN for reporting purposes.

“The BVN is just an identity; the BDC cannot see your account details. It is just like asking you to submit your passport photograph. And the purpose is to make sure that people don’t buy foreign exchange above the limit allowed by the law.

Smartphones Put Power to Deal Currencies Into Retail Traders' Hands

Once the preserve of big international banks, smartphones are putting the power to deal currencies into the hands of a new cohort of traders, who can make a fortune or lose their shirt on the bus to work.

Retail foreign exchange trading has grown rapidly in recent years, but the image has been of a lone trader in front of a computer screen. Smartphones, owned by around half the world's adults, are changing that.

Mobile trading makes up about 60 percent of transactions, up from 10 percent four years ago, at London-based broker Trading 212, whose app has been downloaded over a million times. More than a fifth of clients trade only on smartphones or tablets.

"We are seeing a big number of clients who are not only mobile first, but mobile only," said Ivan Ashminov, Trading 212's co-founder.

Like others, Trading 212 offers demo accounts allowing users, largely male and mostly aged between 25 and 45, to practise with fake money. Many have no previous trading experience, Ashminov said.

5 banks just pled guilty to illegal market-rigging and got hit with billions in fines

1. Five banks — JP Morgan Chase, Citigroup, UBS, Barclays, and the Royal Bank of Scotland — were hit Wednesday with $5.4 billion in fines for attempting to rig foreign exchange markets.
2. Unlike in previous bank regulatory cases, the Justice Department insisted that the banks in question actually plead guilty.
3. Despite this unprecedented regulatory action, the banks -- and their executives and shareholders -- will continue to prosper.

So what did the banks actually do? And how consequential will this regulatory action be?

1) What's a foreign exchange market?

International markets in foreign exchange (you can also call it forex or FX to sound hip and in the know) are where people trade currencies. Dollars turn into euros, pounds, yen, or francs and vice versa. To an extent, people need foreign exchanges to conduct international commerce. If you're an American on vacation in Spain, you are going to end up with some euro-denominated charges on your credit card or ATM card. To settle those charges, your bank is going to need some euros. On a larger scale, big international enterprises need lots of foreign exchange to conduct their business.

A McDonald's or a BMW has both revenue and expenses in various currencies around the world, and they don't always balance. You might have a lot of suppliers in Malaysia but few customers, and a lot of customers in Canada but few suppliers, so you'll need to sell Canadian dollars and buy ringitt to make your cash flow add up.

Record fines for currency market fix

Five of the world's largest banks are to pay fines totalling $5.7bn (£3.6bn) for charges including manipulating the foreign exchange market.

Four of the banks - JPMorgan, Barclays, Citigroup and RBS - have agreed to plead guilty to US criminal charges.

The fifth, UBS, will plead guilty to rigging benchmark interest rates.

Barclays was fined the most, $2.4bn, as it did not join other banks in November to settle investigations by UK, US and Swiss regulators.

Barclays is also sacking eight employees involved in the scheme.

US Attorney General Loretta Lynch said that "almost every day" for five years from 2007, currency traders used a private electronic chat room to manipulate exchange rates.

Their actions harmed "countless consumers, investors and institutions around the world", she said.

Separately, the Federal Reserve fined a sixth bank, Bank of America, $205m over foreign exchange-rigging. All the other banks were fined by both the Department of Justice and the Federal Reserve.

Cartel threat

Regulators said that between 2008 and 2012, several traders formed a cartel and used chat rooms to manipulate prices in their favour.

One Barclays trader who was invited to join the cartel was told: "Mess up and sleep with one eye open at night."

Several strategies were used to manipulate prices and a common scheme was to influence prices around the daily fixing of currency levels.

Investor sues DBS over option advice

SINGAPORE - A Singapore businesswoman, who lost US$6 million (S$8.4 million) in forex trades, has sued DBS Bank, seeking to restore her accounts to their levels before the bank closed out her trading positions.

Ms Florence Suryawan, 53, alleges that the bank had misled her into buying options meant to protect her against volatile forex markets.

These options, which work like insurance, turned out to be "useless" for hedging her investments.

In September 2011, the falling Australian dollar caused Ms Suryawan, who was acquiring the currency through structured products known as accumulators, to suffer massive losses.

After DBS closed out her positions, the total balance of her accounts with the bank fell from US$6.2 million to about US$410,000.

But the bank says it was not responsible, contending that Ms Suryawan was a sophisticated and experienced investor who relied on her own judgment in deciding to buy the options.

Dow Pushes Into Positive Territory for 2015

By SAUMYA VAISHAMPAYAN


The Dow Jones Industrial Average pushed back into positive territory for 2015 for the first time since July, erasing a deep summer slump and leaving all of the main U.S. stock indexes in the black.

The Dow rose 165.22 points, or 0.9%, to 17828.76, and is now up 0.03% for the year. The last time the blue-chip index closed with a 2015 gain was on July 22.

The S&P 500 advanced 24.69 points, or 1.2%, to 2104.05, leaving it 2.2% higher for the year. The Nasdaq Composite climbed 73.40 points, or 1.5%, to 5127.15 and is now up 8.3% in 2015.

The gains signal an easing of concerns about Chinese growth and the stability of emerging markets that sank stocks in August and September. U.S. growth remains sluggish, but solid earnings by some major companies and the continuation of loose monetary policy from major central banks have lifted markets.