The Forex Rigging Irony

While Forex banks, traders, and other institutions are being blamed for market rigging, the Swiss National Bank can publish reports about its own market rigging, but instead of being a scandal, it's economic data.  That's because the vast majority don't understand how the Forex markets work.  It's not insulting - it's a fact.  Currently there are hundreds of pending litigation cases against a plethora of Forex banks, traders, and other institutions - but none against a central bank.  Of course it would be ridiculous to sue a central bank for market rigging - because it's in their mandate to manipulate the market.  Of course they don't call it manipulation, they call it 'market operations' and the Fed, sometimes known as 'market intervention' or 'stabalization efforts.'  Anyhow, it seems strange that on the one hand, central banks manipulate their own currency via 'market operations' which mostly are done through commercial Forex banks, but it is the Forex banks that receive this printed money that are sued, not the central banks.

But look from the CB perspective - what's the point of printing money if you can't use it to intervene in the market and prop your own currency?  

From Fortress Capital (source: Bloomberg):

The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.

The question in everyone's mind now - do these central banks really know what they are doing?  I mean, is there a coordinated international policy?  A conspiracy?  A conspiracy would imply intelligence.  Who knows.  

One perspective is to look at Forex markets from the perspective of those in power, the UHNWI, or 'them' - 'they' or 'The Elite.'  They have all the money they can possibly have - with this money they buy power, such as politicians, countries, people, etc.  They can't buy anything more.  So the only thing left is to ensure the status quo - or ensure as much as possible they maintain their position.  One way to do this which is more subtle, is to destroy the money supply.  By making currency worthless, or worth - less, any potential competition will be either wiped out or marginalized.  Would-be billionaires and up and coming entrepreneurs who are out there in the 'real world' making business, are contained.  It also affords them other opportunities, such as providing this fresh QE money to the private banks they actually own, allowing them to invest in HFT and other stat arb style investment strategies with virtually no risk, allowing them to grow their own portfolios at a level which is practically speaking, exponentially greater than the average investor.  And if their investments fail, they can always bail themselves out - or as the trend is, tax savers and bail themselves in.

Remember, our financial system is created by rules that are constantly changing.  Just as Central Bank are created they are destroyed.  Russia being one of the newest Central Bank in the game; about 30 years old:

The Central Bank of the Russian Federation (Bank of Russia) was established July 13, 1990 as a result of the transformation of the Russian Republican Bank of the State Bank of the USSR. It was accountable to theSupreme Soviet of the RSFSR. On December 2, 1990 the Supreme Soviet of the RSFSR passed the Law on the Central Bank of the Russian Federation (Bank of Russia), according to which the Bank of Russia has become a legal entity, the main bank of the RSFSR and was accountable to the Supreme Soviet of the RSFSR. In June 1991, the charter was adopted by the Bank of Russia. On December 20, 1991 the State Bank of the USSR was abolished and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of the Russian Federation (Bank of Russia), which was then renamed to the Central Bank of the Russian Federation (Bank of Russia). Since 1992, the Bank of Russia began to buy and sell foreign currency on the foreign exchange market created by it, establish and publish the official exchange rates of foreign currencies against the ruble.

If Russia can establish a new Central Bank, why can't the United States of America, Australia, Canada, Germany?  How close are we to a hyperinflationary trap, as happened during the 19th century?

Wildcat banking refers to the practices of banks chartered under state law during the periods of non-federally regulated state banking between 1816 and 1863 in the United States, also known as the Free Banking Era. This era, commonly described as an example of free banking, was not a period of true free banking, as banks were free of only federal regulation; banking was regulated by the states. The actual regulation of banking during this period varied from state to state.

According to some sources, the term came from a bank in Michigan that issued private paper currency with the image of a wildcat. After the bank failed, poorly backed bank notes became known as wildcat currency, and the banks that issued them as wildcat banks.^[1]However, according to others, wildcat meant a rash speculator as early as 1812, and by 1838 had been extended to any risky business venture.^[2] A common conception of the wildcat bank in Westerns and like stories was of a bank that left its safe somewhat ajar for depositors to see, in which the banker would display a barrel full of nails, grain or flour with a thin sprinkling of cash on top, thus fooling depositors into thinking it was a successful bank.  The traditional view of wildcat banks describes them as distributing nearly worthless currency backed by questionable security (such as mortgages and bonds). These actions ended when note circulation by state banks was stopped after the passage of the National Bank Act of 1863. Mark Twain, in his autobiography, refers to the use of such currency in 1853, "The firm paid my wages in wildcat money at its face value".

Certainly, our current system is better that which was used during the "Free Banking Era" because the fiat money today is NOT "worthless currency" - but Central Banks such as the SNB (Swiss National Bank) certainly are trying hard to make it such!

Forex isn't just a money market, it's the underpinning of all other markets (i.e. you sell your stocks for US Dollars).  Learn more about Forex with Splitting Pennies - Understanding Forex - the book.

http://www.zerohedge.com/news/2016-03-24/forex-rigging-irony

Swiss National Bank Admits It Spent $470 Billion On Currency Manipulation Since 2010

By now it is common knowledge that when it comes to massive, taxpayer-backed hedge funds, few are quite as big as the Swiss National Bank, whose roughly $100 billion in equity holdings have been extensively profiled on these pages, including its woefully investments in Valeant and the spike in its buying of AAPL stock at its all time high.

But while the SNB's stock holdings are updated every quarter courtesy of its informative SEC-filed 13F (we wish the Fed would also disclose the equities it holds courtesy of its Citadel proxy), getting a gllimpse of the flow is more problematic, and involves waiting for the hedge fund's, pardon central bank's annual report.

Earlier today patience was rewarded when the SNB filed its 108th annual report, in which it disclosed that it spent CHF 86.1 billion or $88 billion, on current interventions last year, a measure of its efforts to shield the economy from deflation.

As Bloomberg reports, SNB President Thomas Jordan and his colleagues have repeatedly pledged to step in to prevent the franc from strengthening. They’ve done so even since they gave up a minimum exchange rate of 1.20 per euro in January 2015 on the grounds the interventions required to sustain it were out of proportion to the economic benefit. 

This is how the SNB explained its intervention:

In order to fulfil its monetary policy mandate, the SNB may purchase and sell foreign currency against Swiss francs on the financial markets. Foreign exchange transactions can be conducted with a wide range of domestic and foreign counterparties. The SNB accepts well over 100 banks from around the world as counterparties. With this network of contacts, it covers the relevant interbank foreign exchange market. The Singapore branch office facilitates round-the-clock foreign exchange market operations, if necessary.  

In 2015, the SNB purchased a total of CHF 86.1 billion of foreign currency, with the vast majority of foreign currency purchases being made in January. During the remainder of the year, the SNB also remained active in the foreign exchange market in order to influence exchange rate developments, where necessary.

This announcement was an odd departure from SNB protocol: Swiss policy makers rarely state outright that they’ve intervened, and analysts use data on sight deposits and foreign currency reserves to gauge the scope of the central bank’s actions. Breaking with the usual protocol, Jordan said in June the SNB had acted to stabilize the franc amid the Greek debt crisis.

The 2015 figure compares with 25.8 billion francs spent on interventions in 2014 and 188 billion francs in 2012. The SNB made no foreign-currency purchases in 2013.

In other words, as shown in the chart below, the SNB has spent a total of $471 billion to intervene in currency markets since 2010, amounting to two thirds of the country's GDP, and in the end failed after the drain simply became too big.

And yet somehow "analysts" think that where Switzerland failed, China will be able successful in maintaining its closed capital account.

http://www.zerohedge.com/news/2016-03-24/swiss-national-bank-admits-it-spent-470-billion-currency-manipulation-2010

Copying Japan: The Big Banks Confess

Back at the end of 2008, Western central banks (led by the Federal Reserve) embarked upon the most radical, extreme, and simply insane monetary policies ever contemplated in our modern economic era as a supposed response to the Crash of ‘08. Zero-percent interest rates. “Quantitative easing.” Hyper-inflationary levels of money printing.

Many readers may not fully comprehend the level of insanity (and fraud) inherent in such extreme monetary policies, so further explanation will be provided. First of all, there is no such thing as “a 0% loan” (and thus a 0% interest rate). But don’t accept the word of this writer.

Just try engaging in some “0% loans” in your own financial affairs, and then see what happens when you report such transactions to the Tax Man. You will quickly be informed that your supposed “0% loans” are legally deemed to be sham transactions. The Tax Man would then immediately add that these supposed loans would legally be deemed to be what they actually are: gifts – and you would be taxed (and perhaps prosecuted) accordingly.

So-called “0% interest rates” and any “loans” made at that non-existent rate of interest are prima facie fraud. Thus we start from the standpoint that at the end of 2008, the Federal Reserve knowingly and willingly embarked upon a massive campaign of (fraudulent) sham transactions, which continued until near the end of 2015 and totalled in the many trillions of dollars.

The Federal Reserve, instead of lending out these trillions of its new funny-money (at a real/legitimate rate of interest), has simply been handing it all to Wall Street, for free, via a long series of sham transactions. That’s a lot of fraud.

“Quantitative easing” is even more overt fraud. It is literally a euphemism of a euphemism. What is quantitative easing (apart from being an absolutely meaningless phrase)? It is “monetizing debt.” What is monetizing debt? It is another euphemism, which is thus also absolutely meaningless. But what does itreally mean?

“Monetizing debt” is when a government is so close to bankruptcy that it can no longer even borrow enough money to (temporarily) pay its bills. Thus the regime simply conjures more “money” – completely out of thin air -- and then uses this worthless funny-money to pretend to “pay its bills.”

Officially, we were told by our governments that this so-called quantitative easing was to “stimulate our economies.” Yes, it is undoubtedly more “stimulative” for an economy to continue to pretend to pay its bills than to declare bankruptcy. The entire Corporate media parroted this absurdity, proving yet again that this (illegal) oligopoly is anything but “a free press.”

Then we have the actual rate of money printing itself. At the risk of boring regular readers, this must once again be reviewed for the benefit of newer readers. Below is the last legitimate representation of the U.S. monetary base (and the rate of money printing that has been occurring).

Subsequent to this, the chart, and now even the data itself, have been falsified, rendering newer versions of this chart deceptive at best. What this chart shows is the hyperinflation of a currency (the U.S. dollar), past tense.

This is a picture of a classic, parabolic exponential curve. In simpler terms, it is the mathematical representation of the phrase “out of control.” Directly implied by that phrase, and a basic principal of any such extreme, exponential function, is that “control” can never be regained. What is the result when any nation has lost control (past tense) of its money printing – in the form of an upward spiral? Hyperinflation.

The U.S. dollar is fundamentally worthless. Indeed, it is fundamentally worthless based upon several, separate metrics. Other Western currencies, which are now mere derivatives of the USD, are equally worthless. The day that “quantitative easing” began was the day that Western governments began feigning solvency via overt fraud.

However, we got more than just (extreme) actions by our central banks and the puppet governmentsbeneath them. We also got promises – big promises. Originally, the central bankers acknowledged the fact that their “policies” were the most extreme monetary voodoo ever perpetrated by any central bank.

In acknowledgment of that fact, we were given firm and solemn promises from all the central banks (and all their crooked foot-soldiers) that an “Exit Strategy” would commence immediately, in early 2009. Interest rates would quickly be “normalized.” The money printing would quickly be curtailed, before the hyperinflationary spiral in the previous chart could ever materialize.

But we got more than that. Even more emphatically, the central bankers and puppet politicians all puffed out their chests and proclaimed that they would never, ever “copy Japan.”

All that they were waiting for were “signs of economic stability”, so that (supposedly) it would then be safe to disconnect this economic defibrillator from the hearts of all Western economies. Did we see such signs? Supposedly.

In early 2009, the U.S. government, the Federal Reserve, all the charlatan economists , and the Corporate media proudly crowed in unison that the United States had begun its Recovery. Since then, this same flock has continued to chirp regularly about the “strengthening Recovery.” Yes, the U.S. economy has kept recovering, and recovering, and recovering some more.

Did we get the Exit Strategy? No.

The United States kept its interest rate at a (fraudulent) “0%”. Understand the significance here. As B.S. Bernanke was perpetrating his infamous “helicopter drop” of funny-money, to a hyperinflationary degree, every last penny of this unimaginable mountain of funny-money was being handed to the Wall Street crime syndicate for free.

If we took every lottery in human history, added them all together, and then multiplied that by 100, it would still be far less than the “lottery prize” which B.S. Bernanke handed to Wall Street, tax-free. But it gets worse. In our era of ultra-fraudulent “fractional-reserve banking,” each member of the Big Bank crime syndicate is allowed to “leverage” all of its free $trillions in funny-money by a ratio (i.e. multiple) of greater than 30:1.

This represents an orgy of monetary fraud of virtually infinite size, and we were promised (in 2008, and repeatedly after that) that it would never, and could never, happen, because we would never “copy Japan.” Indeed, the Western central bank cabal did not (merely) “copy Japan”, but went literally orders of magnitude beyond Japan in its monetary debauchery and fraud.

Leap forward to March of 2016 and the amusing quasi-confession from one of the members of this Big Bank crime syndicate: HSBC. Of course, readers still need to pull out their translation gear, since even this quasi-confession is twisted almost beyond recognition by the propagandists of CNBC, starting with the headline.

World copying Japan’s slow-puncture economy: HSBC

Machiavellian. What is another way of characterizing an economy, other than as a tire that will soon run out of air? In a death-spiral. Copying Japan’s economic/monetary death-spiral. The “world” is copying Japan’s death-spiral. Wrong.

Does the “world” all have their interest rates at near-zero, or lower? No, just the Corrupt West. Is the “world” all engaged in quantitative easing? No, just the corrupt West. Has the “world” all hyperinflated their currencies to worthlessness? No, just the Corrupt West. The Corrupt West is copying Japan’s death-spiral – after these regimes (and their central bankers) promised us again and again that this would never, and could never, happen.

The propaganda continues:

The global economy appears to be trapped in Japan-style stagnation, HSBC’s high-profile senior economic advisor said on Tuesday, adding his voice to the chorus of economist warnings.

What is the only non-Machiavellian aspect of that statement? That, once again, we are dealing with “a chorus,” i.e. a propaganda machine. Since we have already established that it is (laughably) inaccurate to lump together the Corrupt West and the Rest of the World, let’s deal with these two groups separately and then reconsider the propaganda above.

Is the Corrupt West “trapped”? Yes, if you dig a great, big hole in the ground, and then you jump into that hole, you will be trapped. What is missing from this Revisionist version of events from HSBC and CNBC is that the West’s “trap” was both voluntary and self-created. If you deliberately choose to copy a 25-yearfailed economic experiment, it doesn’t take a renowned psychic to “predict” the result. Even an economist should be able to do so.

Doing what Japan did, except to a much greater (and much more fraudulent) degree didn’t change the probability of the outcome at all. It merely reduced the time it would take the Corrupt West to duplicate Japan’s economic suicide, and reduced that time rapidly. It’s now taken Japan more than 30 years to get to where it is today. It took the Corrupt West (and their psychopathic central banks) less than 1/3 rd that amount of time to do twice as much damage to their own economies. And now we get a partial confession.

What about the Rest of the World? Is it “trapped”? Yes, but the trap is of an entirely different nature, beginning with the fact that the “trap” which has ensnared these other nations was not self-inflicted. Rather, the nations of the Rest of the World are victims of the Big Bank crime syndicate.

How does (how did) the bankers make the hollowed-out, bankrupt, fraud-saturated economies of the Corrupt West look slightly less putrid and cancerous? A Reverse-Beauty Contest. This crime syndicate has devoted much of its energies over the previous five years systematically sabotaging virtually every othereconomy on Earth.

The primary weapon of the One Bank crime syndicate as it has engaged in this economic terrorism is currency manipulation. This is not a “conspiracy theory.” It is a conspiracy fact, as these terrorist Big Bank tentacles were recently convicted of serially manipulating all of the world’s currencies, with this particular Big Bank crime-conspiracy documented dating back to at least 2008. Does that year ring a bell?

During that interval, India experienced a “currency crisis.” Russia experienced a “currency crisis.” Brazil experienced a “currency crisis.” South Africa experienced a “currency crisis.” Now even China is experiencing a “currency crisis.”

These convicted currency-manipulators have created a “currency crisis” in 100% of the “BRICS” economies, which are supposedly the world’s strongest and most powerful economies outside of the Corrupt West. Imagine how easy it was for these economic terrorists to create “currency crises” in lesser economies all around the world.

Have we gotten a “confession” to all of that? No. That would be far too much truth to ever emanate from either the Corporate media or the Big Bank crime syndicate. For today, all we have gotten is a partial confession that all of the West’s central bankers and all of their puppet politicians have done what they promised that they would never, ever do: copy Japan.

 http://www.zerohedge.com/news/2016-03-21/copying-japan-big-banks-confess 

Former Goldman Employee Avoids Prison, Gets $5,000 Fine For Stealing Secret NY Fed Documents

One week ago we were stunned to learn, and report, that as part of the "sentencing" of former NY Fed employee Jason Gross who had admitted to stealing confidential Federal Reserve information and passing it on to his former boss Rohit Bansal, then employed at Goldman Sachs, in hopes of generating goodwill and a comfortable post-Fed job at 200 West, he somehow managed to avoid any jail time and instead was slapped with a draconian penalty: a $2,000 fine.... oh and some community service.

Jason Gross

The sentencing judge, U.S. Magistrate Judge Gabriel Gorenstein, explained his ludicrous decision by saying his treatment of Gross sent "a powerful message to others." Right - a message that if you steal from the Fed and hand over the information to a potential future employer, you will never go to prison but instead will pay a token fine and dig some trenches. And that's if you get caught.

While we were disgusted with the lack of justice for Gross, we knew we would be even more disgusted once his co-conspirator, former NY Fed and Goldman employee, Rohit Bansal, was sentenced earlier today. We said that "as for Bansal, who also pleaded guilty in November to theft of government property, he is scheduled to be sentenced on Tuesday. We expect he too will avoid prison time."

This, too, turned out to be 100% correct.

As we predicted one week ago, and as Bloomberg reported moments ago, Rohit Bansal avoided prison time, and instead was sentenced to two years’ probation after pleading guilty to a misdemeanor. U.S. District Judge Gabriel Gorenstein at a sentencing hearing in Manhattan also ordered Bansal to perform 300 hours of community service and pay a $5,000 fine.

Rohit Bansal, who prosecutors said should get as long as a year in prison, pleaded guilty last year to obtaining about 35 documents on about 20 occasions from his friend Jason Gross, who was employed at the New York Fed, according to a settlement last year between New York-based Goldman Sachs and the New York Department of Financial Services.

How did both former NY Fed employees avoid spending even one day in prison between them? "Bansal asked that he be sentenced to no prison saying he’d made "significant" efforts to make up for his misconduct by agreeing to help regulators and the government when first approached by authorities. He also said he continued to cooperate with the Board of Governors of the Federal Reserve system in its related independent investigation."

So... he settled, just as his NY Fed leaker Jason Gross did, and the outcome was... no prison time for both of them! Just how is this considered equitable justice, or a quid-pro-quoby the US government is not clear, because ultimately the only "punishment" for both of them was some pocket change and hanging out in the open air, planting trees.

As a reminder, Bansal worked at Goldman Sachs from July 2014 until October 2014 where he provided advice on regulatory issues to bank clients, including banks supervised by the New York Fed. Prior to joining Goldman, Bansal worked at the Fed from about August 2007 to March 2014. 

As for Goldman, it itself agreed to pay a $50 million fine and accepted a three-year ban on some advisory work in New York as part of a settlement with the state regulator. The bank admitted it failed to properly supervise the employee. What it really admitted to was knowing full well it was receiving stolen NY Fed information and thus enriching itself illegally. Which, for the biggest hedge fund incubator of central bankers is nothing new.

As is nothing new the final tally of corrupt, criminal bankers who are going to prison as a result of this grotesque crime: zero.

http://www.zerohedge.com/news/2016-03-22/former-goldman-employee-avoids-prison-gets-5000-fine-stealing-secret-ny-fed-document

NFA orders Plantation, Florida retail foreign exchange dealer and swap dealer IBFX to permanently withdraw from NFA membership

NFA orders Plantation, Florida retail foreign exchange dealer and swap dealer IBFX to permanently withdraw from NFA membership

March 15, Chicago—National Futures Association (NFA) has ordered IBFX, Inc. (IBFX), an NFA Member registered retail foreign exchange dealer and provisionally registered swap dealer (SD) located in Plantation, Florida, to permanently withdraw from NFA membership and from acting as a principal of an NFA Member.

The Decision, issued by NFA's Business Conduct Committee (BCC), is based on a Complaint authorized by the BCC on November 2, 2015, and a settlement offer submitted by IBFX. The Complaint alleged that IBFX failed to comply with Chief Compliance Officer requirements as a provisionally registered SD and failed to implement an adequate risk management program. In addition, the Complaint alleged that IBFX failed to maintain the required minimum adjusted net capital, failed to notify NFA of the firm's capital deficiencies, failed to maintain complete and accurate books and records, and failed to adequately supervise the firm's operations.

The complete text of the Complaint and Decision can be viewed on NFA's website.

https://www.nfa.futures.org/news/newsRel.asp?ArticleID=4707

Goldman FX Head: "No Central Bank Conspiracy" To Crush The Dollar, "We Are Right, The Market Is Wrong"

Anyone having listened, and traded according to the recommendations of Goldman chief FX strategist Robin Brooks in the past 4 months, is most likely broke.  First it was his call to govery short the EURUSD ahead of the December ECB meeting, which however led to the biggest EURUSD surge since the announcement of QE1.  Then, two weeks ago, ahead of the ECB meeting he "doubled down" on calls to short the EUR ahead of the ECB, the result again was a EUR super surge, the biggest since December. And then, as we previously reported, ahead of the FOMC's uber-dovish meeting, Brooks released a note titled the "The Dollar Rally Is Far From Over" in which he said the following: "today brings the latest FOMC meeting. We expect the Fed to signal that it wants to continue normalizing policy, which means three hikes this year and four in 2017, with the statement referring to the risks as “nearly balanced,” reverting to phraseology used in October, just before December lift-off. Overall, our sense is that the outcome will be more hawkish than market pricing, in particular given that the FOMC may leave open the option of tightening at the April meeting."

He couldn't have been more wrong, and the result was the biigest two-day crash in the US Dollar.

In sum, just his latest three calls have resulted in nearly 1000 pips worth of losses. Add 50x leverage and...well, we know why hedge funds are getting obliterated.

One thing we didn't know is  whether after being spectacularly wrong for three consecutive times, Brooks would finally thrown in the towel and stop crucifying muppets. We got the answer this morning, when not only has Goldman's chief FX strategist quadrupled down on his wrong-way bets, saying it's not Goldman that is wrong, but the central banks (as he puts it, "an unfortunate series of misfires from central banks, most notably the ECB"), and perhaps more importantly, quashes speculation that there is a central bank conspiracy to move the dollar lower, to wit. "we see no conspiracy to stabilize exchange rates", which is all the confirmation we needed that the Shanghai G-20 summit was indeed just a mini Plaza Accord "conspiracy" (in Goldman's words) to force the dollar lower, if only for the time being until the impact of the soaring Yen and Euro slams Japanese and European stocks low enough, and we go back to square one at which point Goldman will finally be right, and the USD will soar 15% higher in very short notice.

Here is Brooks' full note:

Going up is hard to do

Over the past year, the Fed has repeatedly arrested the Dollar rise (Exhibit 1) and this week’s FOMC, with the shift in rhetoric towards caution over external risks, marked another iteration. We have sympathy for the Fed’s dilemma. After all, BoJ and ECB easing led the Dollar to rise sharply in H2 2014, before US monetary policy normalization could even begin. For the Fed, this is a major headache because – if our expectation for Fed hikes is correct – USD could rise another 15 percent (Exhibit 2), i.e. underlying appreciation pressure is large. This might be why the Fed is modulating its message, for fear that sounding upbeat could trigger another sharp rise in the Dollar. In this FX Views, we make three points: (i) dovish shifts from the Fed over the past year have only been able to put the Dollar into a holding pattern, they have not reversed the 2014 rise; (ii) data will ultimately force the Fed’s hand, which is why our US economists have stuck with their call for three hikes this year; and (iii) the underlying case for the divergence trade is stronger, not weaker, given that a dovish Fed will spur US outperformance versus the Euro zone and Japan. Going up is hard to do, but the Dollar will go up.

There is no doubt that Wednesday’s FOMC was a dovish surprise. But it is important to distinguish between what this week may signal (delayed tightening) and what it does not (a return to easing). This distinction matters because – as we have learned over the past year – delay only arrests Dollar strength, it does not reverse it. In the big picture, our first commandment for 2016 FX still stands, which is that – following the large rise of the Dollar in H2 2014 – the growth and inflation picture looks robust, which means that underlying momentum in the US is stronger than it appears. This is one reason why our US team has stuck to its call for three hikes in 2016 and why we believe data will ultimately force the Fed’s hand. In the interim, there are obviously questions around the Fed’s reaction function. The one thing that stands out to us is that recent Fed statements have become more volatile: dovish in September over global risks, hawkish in October with the signal for imminent lift-off, dovish in January with the suspended risks balance, and dovish again this past week (Exhibit 3). This argues against taking this latest surprise too seriously. If we are right about data, the Fed could quickly reverse course, in line with our US team’s call.

There is mounting concern – after the recent run of unhelpful central bank meetings – that the divergence trade is over. But from a fundamental perspective, this week’s dovish shift from the Fed will only spur US outperformance versus the G10, which is pronounced even with the Dollar substantially stronger over the last two years (Exhibit 4). For the US in such a setting to loosen its financial conditions at the expense of its G10 peers makes no sense (Exhibit 5), something that has only been compounded by the ECB’s pivot to credit easing (Exhibit 6), given that Euro strength in the wake of that decision has been undoing some of the positives from tighter credit spreads. Overall, the fundamental case for the divergence trade is stronger, not weaker, after the latest Fed meeting.

Pessimism over the divergence trade is compounded by worries that the February G20 meeting may have seen a behind-the-scenes agreement for the ECB and BoJ to desist from policies that could push the Dollar stronger. Comparing the February communique with that from September, there are two notable changes. First, the February communique contains language that countries should refrain from “disorderly moves” in their exchange rates, a reference to China and in line with our view that a large, one-off devaluation of the RMB is unlikely. Second, the September communique contained language that “monetary policy tightening is more likely in some advanced countries,” a reference to US monetary policy normalization. That language is missing from the February communique, which we think reflects US officials’ concern over market moves at the time. With the rebound in risk since then, we think that omission is dated, much as the past week’s dovish shift from the FOMC may turn out to be. We see no conspiracy to stabilize exchange rates, just an unfortunate string of misfires from central banks (most notably the ECB), which will ultimately reinforce the divergence theme.

Goldman's determination to see the USD higher probably means that the dollar has quite a bit downside left. Recall from our post yesterday, that the best trade to take advantage of this is to sell the USD during US hours offset by a dollar long during the rest of the trading day.

Only once Brooks is Gartmaned, will it be safe to go long the USD again, a move which will also unleash the next leg lower in crude, and thanks to China's promptly response, global stock markets too.

http://www.zerohedge.com/news/2016-03-20/goldman-fx-head-no-central-bank-conspiracy-crush-dollar

A Strange Pattern Emerges When Trading The US Dollar In 2016

One of the more surprising market developments of 2016 has been the violent obliteration of those who had taken part in the biggest consensus trade of 2015, namely long the USD. As the Fed finally admitted earlier this week, the US economy is sputtering and is woefully incapable of handling 4 rate hikes, or 3 for that matter. In fact, the Fed will be lucky to push through even one more rate hike without the Chinese Yuan collapsing and unleashing even more capital outflows (which precipitated the major market swoons in the summer of 2015 and early 2016) arguably the main topic during the alleged Shanghai G-20 "central bank accord." The result: this week saw the biggest two-day USD collapse against a basked of foreign currencies in years, and currently the DXY is trading at a lower level than a year ago.

However, to say that the dollar selloff is a development would be incorrect: as Bank of America points out, Dollar selling has been going on for the past three months. 

But what is more curious is when during the day this selling has taken place.

As Bank of America's FX quant strategist, Vadim Iaralov writes, "ahead of the Fed, the USD was already trending lower against 8 out of 9 G10 currency pairs with GBP being the only exception. The surprisingly-dovish Fed has only further accelerated the decline in the US dollar. The decline started in late January and has occurred during the critical local New York trading hours. The US hours downtrend looks likely to continue in the near future."

What becomes immediately visible when one looks at the chart below is that all of the USD selling in 2016 has taken place during US hours.

This, according to BofA chief FX strategist, Athanasios Vamvakidis means that "the market moves would be consistent with EM central bank interventions."

Perhaps: if true it would suggest that some very notable "EM" central banks (a polite euphemism for the PBOC) have been dumping the USD during US hours, which in turn would explain the coordinated attack against the USD - now with Fed participation - ever since the Shanghai G-20 meeting (although it would not explain why Japan or Europe would be willing to piggyback on this trade as while China wants a weaker dollar, Europe and Japan want the USD as strong as possible).

Whatever the reason, and whoever may be causing this odd temporal divergence, thanks to BofA's observation an interesting arb emerges: buy the USD during Asia and UK hours, and sell during the US day, sit back and collect the profit.

Then again, now that this trade has been exposed and every FX trader sure to jump on it, we would expect precisely the opposite to take place: dollar strength during US hours offset by weakness during the rest of the trading day. We will update readers when the temporal regime changes, which we are confident it will in the not too distant future.

http://www.zerohedge.com/news/2016-03-19/strange-pattern-emerges-when-trading-us-dollar-2016

EES: Splitting Pennies Book Preview released

Checkout this preview of Splitting Pennies - Understanding Forex

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JPM Announces $1.9 Billion Buyback One Month After CEO Jamie Dimon Buys 500,000 Shares In The Open Market

On February 12, Jamie Dimon made headlines when he bought 500,000 shares, or some $26 million worth of JPM stock which coming one day after the market hit its lowest point in the recent selloff, has become known as the "Dimon Bottom." Was it just good timing or was there something more to the purchase some wondered. As it turns out the purchase may have been nothing more than Jamie frontrunning his own company's multi-billion buyback, because as JPM announced moments ago, the company of which he is a CEO, just authorized the repurchase of an additional $1.9 billion in stock over the next three months, thereby assuring CEO Jamie of an even great profits on his recent acquisition.

From the release:

JPMorgan Chase & Co. (NYSE: JPM) (“JPMorgan Chase” or the “Firm”) today announced that the Firm’s Board of Directors has authorized the repurchase of up to an additional $1.88 billion of common equity through the end of the second quarter of 2016 as part of the Firm’s current equity repurchase program. This amount is in addition to the $6.4 billion of common equity authorized for repurchase by the Board last year. The Firm has received a non-objection from the Board of Governors of the Federal Reserve System to this increase in the amount of common equity that may be repurchased under the Firm’s 2015 capital plan.

The timing and exact amount of purchases of common equity by JPMorgan Chase under its equity repurchase program will depend on various factors, including market conditions, the Firm’s capital position, internal capital generation, alternative investment opportunities, and legal and regulatory considerations; the Firm’s repurchase program does not include specific price targets or timetables, and may be executed through open market purchases or privately negotiated transactions, including the use of Rule 10b5-1 programs, and may be suspended at any time.

And now the legal question: did Dimon have knowledge that JPMorgan would conduct this buyback just one month ago when he purchased JPM stock in the open market to make a "statement." We doubt any regulators will ask this obvious question as even if he did, it will surely be chalked up to merely just another "tempest in a teacup."

http://www.zerohedge.com/news/2016-03-17/jpm-announces-19-billion-buyback-one-month-after-ceo-jamie-dimon-buys-500000-shares-

Plot Thickens In New York Fed Heist As $30 Million In Cash Said Delivered To Mystery Chinese Man

One week ago, we documented the Hollywood-esque theft of $100 million from accounts held at the NY Fed and belonging to the central bank of Bangladesh.

In many ways, the heist was elegantly planned and executed and in others it was comically amateurish.

Here are the basics: On February 5, Bill Dudley's New York Fed was allegedly “penetrated” when “hackers” (of supposed Chinese origin) stole $100 million from accounts belonging to the Bangladesh central bank. The money was then channeled to the Philippines where it was sold on the black market and funneled to “local casinos” (to quote AFP). After the casino laundering, it was sent back to the same black market FX broker who promptly moved it to “overseas accounts within days.”

Basically, hackers got ahold of Bangladesh’s SWIFT codes and bombarded the NY Fed with requests for funds from the country’s FX reserves. Mercifully, the Fed declined to clear separate transfers worth some $870 million, but not before $100 million got away.

Four transfer requests totaling $81 million went through, but a fifth was held up when whoever was making the request tried to have $20 million sent to an imaginary NGO called Shalika Foundation but accidentally spelled “foundation” as “fandation.”

According to the Philippine Daily Inquirer, the money was routed to three casino bank accounts via the Jupiter Street, Makati City, branch of Rizal Commercial Banking Corp. The country’s gaming regulator was investigating.

Now, we get new details on what is a truly fascinating story.

First, we learn that the hackers who spelled “foundation” wrong weren’t the only ones to do something silly. The requests came in on a Friday, which is notable because as WSJ writes, “Friday is the weekend in Bangladesh and the central bank’s offices were closed.”

So, “the fact that the money was being wired to personal bank accounts in the Philippines rang alarm bells,” but apparently, the fact that it was a weekend did not.

Still, there were people at the office.

In fact, it was a printer error that tipped Bangladesh off to the scam. “Zubair Bin Huda, a joint director of Bangladesh Bank, found the printer tray empty when he looked on the morning of Feb. 5 for confirmations of SWIFT financial transactions that are normally printed automatically overnight,” Bloomberg reports. “Because it was a Friday -- a weekend in Muslim-majority Bangladesh -- Huda left the office around 11:15 a.m. and asked his colleagues to help fix the problem [but] it took them more than 24 hours before they could manually print the receipts, which revealed dozens of questionable transactions that sent the bank racing to stop cash from leaving its account with the Federal Reserve Bank of New York to the Philippines, Sri Lanka and beyond.”

As the story goes, Huda came into the office on Saturday and found a flashing message on the terminal connecting to the SWIFT system that read: “A file is missing or changed.” Finally, once Huda managed to get the things up and running his team found “receipts show[ing] the Federal Reserve Bank of New York sent back queries to Bangladesh Bank against 46 payment orders in different messages,” Bloomberg recounts.

Well at that point, it was panic time but because it was Saturday, no one was home at the NY Fed. 

Anyway, the crack squad at the Philippine anti-money laundering agency has determined that someone needs to check out the branch manager at the bank where the money ended up. That manager is one Maia Santos Deguito. “[She] is a key player here because if you don’t have the cooperation of the branch manager, this could not have been done,” Senator Serge Osmena, vice chairman of the country’s blue ribbon committee, which investigates major issues, told reporters on Wednesday.

That’s correct. It’s also “slightly” suspicious that the CCTV cameras at the branch weren’t working when the money was withdrawn. Rizal wouldn’t immediately comment on the CCTV “issue.”

Deguito decided to essentially plead to fifth in a hearing and it’s easy to understand why. She apparently ignored requests from the Bangladesh central bank to stop the transfers.

After the money left the bank it went to two casinos and "a man of Chinese origin," according to Reuters. 

"$29 million ended up in an account of Solaire, a casino resort owned and operated by Bloombery Resorts Corp which is controlled by Enrique Razon, the Philippines' fifth-richest man in 2015, a further $21 million went to an account of Eastern Hawaii Leisure Co., a gaming firm in northern Philippines," and that, according to Teofisto Guingona, head of the Philippine Senate's anti-corruption committee, is where "the paper trails ends" because "casinos are not covered by the country's anti-money laundering laws."

So what of the mysterious "Chinese" man? Well, we don't know. All we know is that he ended up receiveing $30 million in cash in three deliveries via an FX broker called Philrem Service Corp which of course wouldn't talk to Reuters.

Meanwhile, Bangladesh’s central-bank governor, Atiur Rahman - this poor guy...

... took the fall, saying he "took moral responsibility" for the loss. He resigned after seven years at the bank. 

We're sure that any day now, Bill Dudley will set up a small table in his back yard, surround himself with reports sitting in the grass, and fall on his sword as well. After all, it's his "moral responsibility." 

(Bangladesh... hmmm... is that some place we can see from the roof at 33 Liberty?)

http://www.zerohedge.com/news/2016-03-16/plot-thickens-new-york-fed-heist-30-million-cash-said-delivered-mystery-chinese-man