Saturday 30th August 2014
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South Africa’s central bank has disagreed with a ratings decision by Moody’s to downgrade Capitec Bank Limited (Capitec) by two notches, and place it on review for a further downgrade. The central bank says it respects the independent opinion of rating agencies but that it does not “agree with the rationale given in taking this step”. Two reasons are given for the rating action: a lower likelihood of sovereign systemic support based on decisions recently taken in relation to African Bank Limited (African Bank), and heightened concerns regarding the risk inherent in Capitec’s consumer lending focus. “With regard to the first point, it is important to reiterate that the approach taken by the SARB to any resolution to address systemic risk will always be based on the circumstances and merits of the particular prevailing situation. Decisions will also be informed, as was the case with African Bank, by principles contained in the Key Attributes for Effective Resolution Regimes proposed by the Financial Stability Board (FSB), which have the objective that a bank should be able to fail without affecting the system,” notes the central bank in an official statement. “This is in keeping with evolving international best practice. In the case of African Bank bond holders and wholesale depositors are taking a 10% haircut, which is generally regarded as being very positive given that the trades following the announcement of African Bank's results were taking place at around 40% of par. Therefore in fact substantial support was provided, not reduced. Moreover, all retail depositors were kept whole and are able to access their accounts fully,” it adds - According to the Hong Kong Monetary Authority (HKMA) credit card receivables increased by 2.1% in the second quarter to HKD112, after a reduction of 6.7% in the previous quarter. The total number of credit card accounts edged up by 0.7% to around 16.8m.The rollover amount, which reflects the amount of borrowing by customers using their credit cards, increased by 2.9% during the quarter to HKD19.2bn. The rollover ratio also rose marginally from 17.0% to 17.1% in the same period. The charge-off amount increased to HKD569mduring the quarter from HKD528m in the previous quarter. Correspondingly, the quarterly charge-off ratio rose to 0.51% from 0.46% in the previous quarter. The amount of rescheduled receivables transferred outside the surveyed institutions’ credit card portfolios reduced to HKD94m from HK$109m in the previous quarter. The delinquent amount increased to HKD249m at end-June from HKD239m at end-March. However, the delinquency ratio remained the same at 0.22% because of an increase in total card receivables. The combined delinquent and rescheduled ratio (after taking into account the transfer of rescheduled receivables mentioned above) edged up to 0.29% from 0.28% during the same period - Harkand has been awarded a contract to support Apache with inspection, repair and maintenance work (IRM) as well as light construction (LC) across their assets in the North Sea, following completion of a competitive tender exercise. The award includes the provision of vessels, ROV and diving services for a three-year period, plus two one-year options. The firm will also support offshore marine construction contractor EMAS AMC who have been awarded a separate contract for pipe lay and heavy construction as part of the same tender process. Harkand Europe managing director, David Kerr, said: “This contract is an important step in strengthening our close working relationship and growing our North Sea business with Apache.

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The Forex Review

By OANDA

 

Bank of Japan Pushes the Yen Lower

Friday, 12 April 2013 Written by 
Bank of Japan Pushes the Yen Lower The Bank of Japan (BoJ) captured the attention of the foreign exchange world last week when it started to live up to the expectations of the market. After much anticipation, and lots of preceding rhetoric, Governor Haruhiko Kuroda announced the BoJ’s plan to double its bond buying efforts to reach the 2% inflation target in the allotted two-year window. It was his comments on Prime Minister Shinzo Abe’s inflation goals while still at the Asian Development Bank that might have won him the top job at the Japanese central bank. Earlier this week, the program kicked into gear and the JPY lost 4% versus the USD and 5% versus the GBP. The main beneficiaries have been Japan’s exporters and holders of Japanese stocks with the Nikkei Index reaching new highs on the value of the yen. http://www.ftseglobalmarkets.com/

The Bank of Japan (BoJ) captured the attention of the foreign exchange world last week when it started to live up to the expectations of the market. After much anticipation, and lots of preceding rhetoric, Governor Haruhiko Kuroda announced the BoJ’s plan to double its bond buying efforts to reach the 2% inflation target in the allotted two-year window. It was his comments on Prime Minister Shinzo Abe’s inflation goals while still at the Asian Development Bank that might have won him the top job at the Japanese central bank. Earlier this week, the program kicked into gear and the JPY lost 4% versus the USD and 5% versus the GBP. The main beneficiaries have been Japan’s exporters and holders of Japanese stocks with the Nikkei Index reaching new highs on the value of the yen.

The decision has not been without its critics and some, such as George Soros, cautioned that the fall in the yen could be “an avalanche” that the BoJ could not stop if the Japanese people start to sell the currency. China and South Korea remain critical of the move, branding it a currency war before the Group of Twenty meeting last February. This week, the negative criticism persisted, but the words used were “monetary blackmail” instead of “currency war”. Those ugly words have not been uttered since the Group of Seven made it clear that as long as Japan’s monetary easing means are used for domestic aims, it does not imply unfair currency manipulation.

 

 

Pound Sterling Fluctuations Continue

The GBP is coming off annual lows versus the USD registered in mid-March. The disappointing nonfarm payrolls jobs report released last week in the U.S. boosted the GBP, though it still remains below the 1.54 level. Last Thursday, the U.S. unemployment claims release came in well-below expected estimates and that in-turn could hinder the pound’s recovery as less Americans claimed unemployment support.

 

 

During the week, the pound gained significantly versus the yen after the BoJ’s new round of easing was introduced. Japan’s bond buying program could double the Japanese monetary base by the end of 2014. Though Kuroda is attempting to follow through on his pledge to reach Prime Minister Abe’s desired 2% inflation target within a tight timeframe, he has also said the BoJ’s ambitions are “flexible”.

 

 

Rise of the United Mexican States

Changes in legislation and favourable U.S. economic conditions have pushed the Mexican peso to a 20-month high. The changes introduced by President Pena Nieto’s administration bolstered confidence in Mexico’s media and telecommunications industries. Last month, the Bank of Mexico cut the overnight rate from 4.5% by 50 basis points after the inflation targets were within range. Bank of Mexico Governor Agustín Carstens has called the rise of the peso a reflection of the nation’s economic strength.

 

 

That statement is tough to refute. The MXN has gained 23.55% versus the JPY, 12.2% versus the GBP, and 8.67% versus the EUR since the beginning of the year.

Alfonso Esparza

Senior Currency Analyst, OANDA
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. He covers central banks and global economic and political trends for OANDA. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and financial services marketing from the University of Toronto.

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