Posts Tagged ‘currency’

Bitcoin’s Wild Ride Shows The Truth: It Is Probably Worth Zero

September 19, 2017
Behind every bubble is a good idea bursting to get out, and Bitcoin kind of looks like a good idea, at least if you squint a bit.
Image result for Chinese yuan, photos

By James Mackintosh
The Wall Street Journal
Updated Sept. 18, 2017 3:08 p.m. ET

Behind every bubble is a good idea bursting to get out, and bitcoin kind of looks like a good idea, at least if you squint a bit. A digital currency without borders that governments can’t control and that allows secret online transactions? I’m in. Bitcoin itself? Not so much.

So is a single bitcoin worth $500,000, $5,000, $500 or $0? I’m inclined to say $0, especially if bitcoin’s value depends on it being adopted as a global digital currency to replace dollars. There is no chance whatsoever that bitcoin can displace the dollar, for the simple reason that it is badly designed. Bitcoin can handle a pathetically small number of transactions, and uses an inordinate amount of electricity to do so, making it entirely unsuitable to replace ordinary money.

Image result for Bitcoin, photos

Even if bitcoin worked better, it is in a Catch-22 because of Gresham’s law, the nostrum that bad money drives out good. Given the choice of spending inflationary government-issued money or something which holds its value, everyone would spend the bad paper stuff and hoard the bitcoin. You wouldn’t want to be the person who spent 10,000 bitcoins on two pizzas in 2010, when a bitcoin was worth a fraction of a cent. Those bitcoins are now worth $40 million. But if no one spends bitcoin, it will never get established as a currency.

Digital Gold Or The Real Inert Lump Of Metal? / Bitcoin’s surged while gold’s done little in recent yearsSource: Thomson Reuters (gold); Coindesk (bitcoin)

There are two somewhat less ambitious claims for bitcoin that could give it value. The first is that it is a limited form of money because of its usefulness for dealing illegal drugs and dodging capital controls. The second is that it is a form of digital gold: an insurance that will keep its value even if governments confiscate or inflate away the buying power of the currencies they issue.

Let us unpack the idea of bitcoin being based on illegal transactions. Dan Davies, a bank analyst at Frontline Analysts in London, came up with a value thanks to bitcoin’s built-in limit of 21 million in circulation.

In any currency, the money supply multiplied by how often it circulates equals the price level times the number of transactions. For bitcoin we can estimate three of the four variables, Mr. Davies says. He observed that even criminals don’t set prices in bitcoin, but rather in dollars, and then immediately convert. Assume that all drug dealing moves online, that bitcoins circulate as rapidly as ordinary currencies and estimate a $120 billion-a-year market for illegal drugs, and the formula spits out an ultimate value of $571 for a single bitcoin. The more drugs traded, the higher the value, and the more bitcoin hoarded rather than spent, the higher the value.


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Drug dealers might be willing to put up with the limitations of bitcoin, notably the uncertain time taken to complete a purchase and the high transaction costs. Laundering dollars is more expensive.

But studies cited by the United Nations Office on Drugs and Crime suggest that cryptocurrency-based online drug dealing remains relatively small, and focused on retail, meaning fewer and smaller transactions than Mr. Davies’s limiting assumption, so justifying a much lower bitcoin price.

On this basis the recent price of $3,950 is mostly speculation, and J.P. Morgan Chase & Co. Chief Executive James Dimon’s comparison to the 17th-century Dutch tulip mania is apt. Bitcoin is “being driven all over the place by speculative portfolio flows,” says Mr. Davies.

Digital gold might be more appealing for bitcoin’s true believers, who would surely prefer to avoid basing a currency on illegal activity.

Gold is hopeless if you want to pay the mortgage or buy bread, but is useful insurance because we can be confident that if a government currency collapses the shiny metal will roughly hold its value.

It helps that history holds plenty of examples of currencies losing all their value to hyperinflation while gold could still be bartered for food and shelter.

Gold has a value far above what is justified by its uses in electronics and jewelry only because (almost) everyone agrees that it has value. That “network effect” is what bitcoin needs to establish itself, and the more attention it garners, the more likely it is to become established. Yet gold has had thousands of years and a history of being used to back money to support its position.

Bitcoin pioneered the cryptocurrency movement, but after eight years, the virtual currency is still struggling to find mainstream acceptance. Author and WSJ Moneybeat reporter Paul Vigna joins Lunch Break’s Tanya Rivero to discuss why many people talk about bitcoin, but most don’t use it. Photo: Bloomberg (Originally published April 21, 2017)

Technological disruption may be overturning many societal norms, but securing society-wide recognition as a safe asset takes more than the backing of tech evangelists and a bunch of get-rich-quick stock promoters.

Still, the potential to replace gold gives us some figures to work with. Thomson Reuters GFMS estimates there were 2,155 metric tons of gold held in exchange-traded funds. Switch all of that into bitcoin and it would justify a price of about $5,500 for the 17 million bitcoins currently outstanding.

We could be more optimistic and think bitcoin might replace gold coins and bars. Leave aside that the gold is better than bitcoin because gold doesn’t depend on having an electricity supply, and the 24,000 metric tons GFMS estimates have been bought for investment in the past half-century would justify a price of $61,000 for every bitcoin.

If we assume that bitcoin will either succeed completely in displacing gold or fail and be worth zero, it helps explain why the digital token has been so incredibly volatile, with a 40% loss in two weeks, and a 33% rebound since Friday’s low. Based on the simple choice between total success and failure, we can very roughly say that bitcoin at 70% of the gold ETF-derived price suggests a 70% chance of displacing so-called paper gold as society’s chosen emergency store of value, and a 6% chance of displacing physical gold.

Even digital dreamers should accept that is far too high.

Write to James Mackintosh at



China confident of maintaining strong growth, Premier Li Keqiang tells heads of six global agencies

September 12, 2017

Nation’s economy was becoming healthier and more sustainable, Li tells IMF, World Bank, WTO chiefs

By Catherine Wong
South China Morning Post

PUBLISHED : Tuesday, 12 September, 2017, 3:43pm
UPDATED : Tuesday, 12 September, 2017, 3:43pm

Chinese Premier Li Keqiang said on Tuesday he was confident China would maintain the strong economic growth it achieved in the first half of the year.

Speaking at a press briefing after a round-table meeting with the heads of six global agencies, including the World Bank, International Monetary Fund and the World Trade Organisation, Li said China’s economy was becoming healthier and more sustainable.

“Judging from the trend of China’s economy over the past few months, it will continue to maintain the momentum of the first half of this year,” he said.

“There will not be any big changes to the trend of China’s economic development.”

The “1+6” dialogue was established in July 2016 when Beijing was working hard to persuade the world that neither its economy nor its currency was on the brink of crashing.

Since then, the situation is has changed significantly. China’s GDP expanded 6.9 per cent in the first half of this year, compared with 6.7 per cent for the whole of 2016, while the yuan has gained almost 6 per cent against the US dollar since January.

Besides the improvements in the headline figures, Li said China’s economy was becoming healthier and more sustainable.

“China has shifted from excessive reliance on investments and exports to a coordinated development of consumption, investment and exports,” Li said.

The progress achieved in shutting down obsolete industrial facilities had “exceeded our expectation”, he added.

Li said also that China’s debt situation, which has been a source of concern regarding the stability of its economy, was “under control”. He did not mention the yuan’s exchange rate.

Speaking at the press briefing, which was attended by all six of the visiting dignitaries, Jim Yong Kim, president of the World Bank, noted China’s continued “leadership in promoting open trade” and said its “Belt and Road Initiative” was expected to help infrastructure spending around the world.

The way in which Li had “embraced” multilateral trade was “critical in what has become a very challenging time”, he said.

Christine Lagarde managing director of the International Monetary Fund, said the IMF was seeing the “progress of reform across a wide range of areas” in China. The agency would continue to offer its “strong support” to China’s reform efforts in terms of boosting consumption, increasing the role of market forces and focusing on the quality rather than quantity of growth, she said.

“Your leadership is as clear as the blue sky in Beijing today,” Lagarde said.

The four other leaders at the talks were Roberto Azevedo, director general of the World Trade Organisation; Guy Ryder, director general of the International Labour Organisation; Angel Gurria, secretary general of the Organisation for Economic Cooperation and Development; and Mark Carney, chairman of the Financial Stability Board.

Yuan’s rise halted as China eases capital controls

September 12, 2017


© AFP/File | The yuan’s rise has been halted as China eases capital controls
SHANGHAI (AFP) – China’s yuan lost ground Tuesday for the first time in two weeks after the central bank relaxed capital controls, sparking speculation the government wants to halt the currency’s recent strengthening.The People’s Bank of China (PBOC) set the yuan’s daily reference rate lower on Tuesday — the first time it had done so in 11 trading sessions — at 6.5277 to the dollar, down 0.43 percent from Monday.

China allows the yuan to rise or fall two percent on either side of the fixed daily rate to control volatility.

The move came after a financial newspaper controlled by the central bank said Monday the PBOC would no longer require banks to set aside a 20 percent deposit on forward sales of foreign exchange, a rule imposed in 2015.

It said foreign institutions which trade the yuan offshore also no longer need to keep reserves in onshore banks.

The latest moves halted the yuan’s recent march to a 16-month high. It triggered speculation that the central bank may be worried the yuan had risen too much and that an official campaign to stem capital outflows has peaked.

“This is a clear positive step of stepping back on capital controls,” Eddie Cheung, a strategist at Standard Chartered in Hong Kong, told Bloomberg News.

“It can be argued that the recent yuan appreciation was too fast. The yuan may be a bit more rangebound in the near term than one-way as markets digest the impact of the move.”

The head of the PBOC’s Research Bureau, Sun Guofeng, was quoted by Chinese financial media on Monday as saying a stabilising China economy and other positive signs made it necessary to readjust rules.

The measures were first imposed in 2015 after the central bank moved the yuan almost five percent lower in a week in August that year.

The yuan, also known as the renminbi, has been under pressure since late 2015 due to uncertainty about the health of the world’s second-largest economy, massive capital outflows seeking better returns abroad and a sharp rise in the dollar.

The yuan had flirted with slipping past 7.0 to the dollar, a threshold not crossed in more than eight years.

The government responded this year by imposing a series of new requirements making it difficult to move capital offshore. Most of these controls remain in place.

“We expect the RMB to fluctuate further and depreciate against the USD in the rest of 2017, to around 6.7 by the end of this year,” Huatai Research said in an analysis.

“The PBOC intends to avoid one-way depreciation or appreciation, with the target of inducing two-way flexibility.”

China Is Striving to Contain Its Once-Diving, Now-Thriving Yuan

September 11, 2017

The currency’s recent surge has prompted Beijing to shift course after two-year effort to keep it from weakening too quickly

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BEIJING—China is reversing a range of measures it had put in place to support its currency, a response to a recent surge in the value of the yuan that has hurt Chinese exporters and added to the country’s economic headwinds.

Starting Monday, the People’s Bank of China will scrap a two-year-old rule that made it more expensive for traders to bet the yuan will fall in value, according to a central bank notice sent to commercial banks late Friday.

The move, which ends a deposit requirement on trades called currency forwards, will make it less expensive for companies and investors to buy dollars while selling the yuan. That would put some pressure on the currency to decline, traders and analysts said. The step will “fend off macro-financial risks,” said the central bank notice, which was reviewed by The Wall Street Journal.

According to a separate notice by the PBOC, the monetary authority late Friday also removed the reserve requirement on foreign banks’ yuan deposits, which will release more yuan funds into what is known as the offshore yuan market in Hong Kong, potentially making it easier for foreign investors to bet against the yuan. That requirement was enacted in January 2016.


  • Chinese Exports Grow Again (Sept. 8, 2017)
  • Yuan’s Surprise Strength Handcuffs China’s Ability to Manage Economic Decline (Sept. 8, 2017)
  • China Curbs Hollywood Deals, but Greenlights Tech Investments (Aug. 18, 2017)
  • China Maintains 6.9% Economic Growth (July 17, 2017)
  • China Issuing ‘Strict Controls’ on Overseas Investment (Nov. 26, 2016)
  • China to Raise Reserve Ratio for Offshore Yuan Clearing Banks (Jan. 17, 2016)
  • China Sets New Rules on Yuan Forward Trading (Sept. 1, 2015)

Officials familiar with the policy changes said authorities are also expected to phase out by the end of the month measures put in place late last year to curb China’s outbound investment, a move made when the currency’s value was falling sharply. Many companies complained that move resulted in a near-blanket ban on their foreign-investment endeavors. It will be replaced by formal guidelines issued by the State Council in August.

Those new guidelines encourage foreign deals in some areas such as technology, while discouraging them in property, sports, entertainment and other sectors. “As situations in the foreign-exchange market improve, it makes sense to withdraw some of those temporary measures,” said one of the officials involved in policy making.

In dismantling certain controls, Beijing is shifting course from an effort started two years ago to keep the yuan from weakening too quickly and to maintain confidence in the world’s second-largest economy. To do so, Beijing subjected outbound investments to heavy scrutiny, made betting on the yuan’s decline more expensive for traders and burned through $1 trillion in foreign-exchange reserves to support the yuan in the past several years.

China’s strategies gained traction this year. But an unexpectedly prolonged softening of the dollar has caused the yuan to soar, making the currency again a policy headache for the government. So far this year, the yuan has more than recouped all of its 6.6% decline against the dollar last year, and last week alone, it gained more than 1.8%—its biggest weekly advance in almost 12 years.

Andy Rothman, investment strategist at Matthews Asia, said the significant weakness of the dollar, along with Beijing’s continued intervention in the market that has led to a rebuild of China’s foreign-exchange reserves, has “left the Chinese government much less nervous about the need to micromanage currency flows.”

China’s foreign-exchange reserves rose by $10.8 billion to $3.09 trillion by the end of August. Since the end of last year, China’s reserves have risen $81 billion.

Mr. Rothman said he didn’t think there has been a change in Beijing’s overall approach to the currency, which is to keep the yuan relatively stable against a basket of currencies while letting the direction of the dollar drive the yuan’s movement. “If you think the dollar will continue to weaken, it makes sense to loosen some of the capital controls” that aimed to support the yuan, he added.

The yuan’s surge is starting to drag on China’s export growth, making Chinese goods more expensive and threatening to erode profits for many manufacturers that sell to foreign markets. That further weighs on the economy which is forecast to resume a yearslong slowdown and is struggling with anemic private investment, heavy corporate debt and frothy real-estate prices.

“It’s really hard to understand why the renminbi is soaring all of sudden,” said Pan Haisong, who runs Shanghai Taijing International Freight Co., an international shipping company. Renminbi, or the people’s currency, is another name for the yuan.

Mr. Pan said many of his exporter clients have reduced their orders because of the the rising yuan.

Customs data released Friday show that China’s exports increased 5.5% in August from a year earlier, lower than July’s 7.2% rise and the 6% growth forecast from economists polled by the Journal. While Chinese manufacturers are expected to continue to benefit from a recovery in global demand, economists said any continued appreciation of the yuan would crimp a further expansion of Chinese exports.

Beijing isn’t looking for a wholesale weakening of the yuan and still retains formidable control of the currency—from limits on the ability of Chinese companies and individuals to take money out to a heavy hand in setting the yuan’s official rate against the dollar. Known as the “fixing,” the daily official rate indicates which way Beijing wants the yuan to go.

People’s Liberation Army guards in front of the People’s Bank of China building in Beijing in JanuaryPhoto: Gilles Sabrié for The Wall Street Journal

On Friday, for instance, the central bank set the fixing weaker than the market had expected, hinting at a desire to control the yuan’s pace of appreciation.

“This is a small step in stemming what has been a strong movement of renminbi strengthening, but there are still many capital controls in place,” said Brendan Ahern, chief investment officer of KraneShares, which runs several China-focused exchange-traded funds.

“These new measures may decelerate the recent surge of the renminbi,” he added.

The PBOC deposit notice issued late Friday involves a rule enacted in October 2015 that required banks to set aside reserves with the central bank when dealing in a financial contract known as currency forwards. Under the rule, banks that were buying dollars while selling yuan under a forward contract were required to deposit $20 with the central bank for every $100 traded. The reserve effectively raised the cost of wagering against the yuan.

As of Monday, no deposit will be required for such a transaction, in effect removing a penalty on a tool that many traders and investors used two years ago to bet on the yuan’s decline. “Now the PBOC is basically inviting short sellers in to help stem the yuan’s rise,” said a currency trader in a Shanghai-based bank.

The latest policy twist underscores how hard it is for Beijing to control the currency to its exact liking. Deepening economic ties between the country and the rest of the world have led to greater cross-border flows of funds, inevitably subjecting the yuan to the whip of market forces, despite the government’s penchant for keeping a strong hold on the economy. At the same time, companies and investors look at Beijing’s policy directions for clues as to which way to play the yuan—and then sometimes pour in, driving the currency in one direction.

Even before Friday’s move, the yuan’s recent surge and its impact on the economy had begun to turn some investors cautious. “We’re neutral on the yuan right now,” said Luke Spajic, head of portfolio management for Asia emerging markets at Pacific Investment Management Co.

Write to Lingling Wei at

Yuan’s Sharp Rise Muddles China’s Growth Picture

September 7, 2017

Currency’s newfound strength surprises traders and adds pressure to country’s businesses

Image result for China, currency piles, photos

A recent surge in the value of the yuan has blindsided Wall Street and stands to complicate China’s efforts to simultaneously manage a slowdown in growth while deepening its ties to global markets.

The yuan jumped to its strongest level in 16 months this week, bringing its total gain versus the dollar to 7% in 2017, more than recouping all of its decline last year. Last month alone, the yuan soared 2% against the dollar, notching its biggest monthly advance since July 2005.

Traders and analysts attribute the yuan’s changing fortunes both to the dollar’s softening and to the Chinese central bank’s stepped-up controls over the yuan—through a tweaked mechanism to guide its value—which have reduced expectations for it to weaken and prodded companies that had been hoarding dollars to convert them into local currency.

In recent trading sessions, investors have regularly pushed the yuan stronger than the level set daily by central bank—a rare occurrence for a currency that has more often been battered over the past year. In Hong Kong, a yuan-trading hub outside the mainland, rising yuan bank deposits suggest individuals are growing more comfortable holding on to the currency rather than swapping it for foreign alternatives.

“Market expectations are at work here,” an official at the People’s Bank of China says.

For years, China seemed to defy the “trilemma,” an economic theory that a country can’t at the same time have a controlled exchange rate, free flow of capital and an independent monetary policy. Now Beijing is betting big on defending the yuan. Photo: Qilai Shen/Bloomberg News (Originally published April 11, 2017)

The yuan’s recent ascent comes with a heavy price tag for Beijing. It has dialed back long-running efforts to make the yuan a freer currency and imposed strict controls on money leaving China. Even as those measures have helped stem outflows—official data Thursday showed China’s foreign-exchange reserves rose for a seventh straight month to $3.092 trillion in August—the steps have damped demand from overseas for Chinese assets despite the government’s effort to attract more foreign investors to buy Chinese stocks and bonds.

Meanwhile, the pent-up desire among Chinese companies and individuals to diversify their assets offshore means that underlying pressures on the yuan to weaken have merely been kept bottled up, economists say. The Chinese economy’s growing challenges, from mounting debts and persistent industrial overcapacity to an out-of-balance housing market, also suggest there is a lack of fundamental drivers to keep the currency going up.

Eric Liu, portfolio manager of Asia fixed income at Manulife Asset Management in Hong Kong, is among the investors who have cut positions in the yuan in the past few days.

“We’ve turned neutral from here because of the magnitude of the move,” Mr. Liu says. “The pace has been too fast.”

Bryan Carter, head of emerging markets fixed income at BNP Paribas Asset Management, believes the policy-driven advance in the yuan is essentially done. He expects the currency to give up some of its recent gains after the Communist Party’s twice-a-decade congress next month, which will help shape the nation’s power structure for years to come.

With that political transition looming, China’s leadership wants its currency to be stable to help fend off financial risks, buttress the economy at home and avoid trade disputes abroad. A roaring yuan, however, is putting pressure on the country’s manufacturers who are counting on an uptick in foreign orders as domestic demand remains lackluster. (An appreciating yuan makes Chinese goods more expensive in markets overseas.)

Wu Yinhe, who runs a stainless-steel kitchenware and furniture manufacturer in southern China, says her company is among those feeling the pinch from a soaring yuan.

“External demand is pretty good,” says Ms. Wu, general manager of Golden Star Steel Furniture Factory in the city of Jiangmen. But the yuan’s strengthening means she is getting less bang for her dollar earnings when she converts them into the Chinese currency, she says.

Such pressure on Chinese businesses doesn’t bode well for an economy that has been struggling with tepid private investment and consumption. Exports have been one of the few bright spots that have helped China keep growth on track in the past few months. And that, economists say, was at least partly due to the yuan’s depreciation in the past year or so, which helped give Chinese exporters a price advantage in foreign markets.

Already, the yuan’s newfound strength has started to weigh. Official data show that year-over-year growth in Chinese goods sold overseas dropped to 7.2% in July from 11.3% in the previous month. Economists polled by The Wall Street Journal expect that growth rate to have fallen further to 6% last month. Notably, year-over-year growth in China’s sales to the U.S. plunged to 8.5% in July from 19.72% in June, and the growth in sales to its other major trading partner, the European Union, also dropped to 9.54% from 15.08%. Most of China’s cross-border trade is priced in dollars.

Over the years, China has sharply reduced its reliance on exports, with the contribution of trade to the Chinese economy much smaller now compared with the early 2000s. Still, analysts say, Beijing can ill afford a slumping export sector when the leadership is stressing economic stability in a year of political transition.

How China manages the yuan is closely watched by policy makers and investors world-wide. Its shifting and often inscrutable foreign-exchange regime has been a lingering source of uncertainty for global markets. Two years ago, the central bank’s sudden 2% devaluation of the yuan set off a global market selloff.

The yuan’s rise is the latest ripple from the 2017 decline in the U.S. dollar. Many investors expected the yuan to fall to 7 to the dollar this year, reflecting a strengthening U.S. economy and Chinese efforts to cushion the export sector. Instead the yuan’s rise to near 6.5 to the dollar has forced a reassessment.

“Most people, including me, are somewhat surprised” by the recent strengthening in the yuan, says Ben Sy, head of fixed income, currencies and commodities at J.P. Morgan Private Bank in Hong Kong. “I don’t think the yuan can rally a lot from here.”

Some traders and analysts say the People’s Bank of China may take measures to limit the yuan’s rise because of the potential toll on growth. But others expect the central bank will let the yuan continue rising for now to make room for it to weaken in the event of any dollar rebound.

Many reform-minded officials and academics have called on Beijing to take advantage of the current market sentiment to renew its efforts to liberalize the yuan.

For now, there are few signs of any meaningful market-oriented change in the offing. In fact, the yuan’s recent surge started when the central bank in late May asserted greater control over the currency by adding what it calls a “countercyclical” factor into the way it sets the yuan’s official rate against the dollar to prevent big fluctuations. This latest policy tweak has given the central bank greater leeway to lift the yuan as the dollar weakens: More than 80% of the yuan’s gain this year occurred after the introduction of that factor.

At the current level, Mr. Sy of J.P. Morgan Private Bank says it is “a bit expensive” to be making bullish bets on the yuan. “But are you going to short?” he says. “People are very interested but really don’t know which way to go.”

Write to Lingling Wei at and Saumya Vaishampayan at

Qatar – Arab States Dispute — “If Qatar was not willing to accept the demands, it is a case of ‘Goodbye Qatar’” — “A wolf eats only sheep that leave the flock”

June 29, 2017

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THE GULF crisis looks set to escalate further after a UAE ambassador threatened to issue harsher sanctions against Doha. Here is the latest news and live updates on Qatar.

PUBLISHED: 08:04, Thu, Jun 29, 2017 | UPDATED: 08:04, Thu, Jun 29, 2017
Qatar economy minister praises ‘resilient economy’
  • The UAE has threatened to force trading partners to choose between working with them and working with Doha.
  • Qatar has rejected the demands tabled by Saudi Arabia and its allies.
  • The US has called on the Gulf bloc to issue a “reasonable and actionable” list of demands.
Thursday June 298.00am: UAE’s Prime Minister Sheikh Mohammad bin Rashid Al Maktoum has urged Qatar to “return to the GCC fold”.

“Now it is time to get united and be one heart and protect each other without grudges or hatred,” he wrote in an Arabic poem, Al-Jazeera reported.

Mr Al Maktoum stressed that the UAE and its Gulf neighbours come  “from one tribe and people.

He added: “We will keep advising Qatar openly in line with the instructions of Prophet Muhammad, who said: A wolf eats only sheep that leave the flock”.

Wednesday June 288.45pm: A United Nations expert and a media freedom watchdog has criticised four Arab states for seeking to close Al Jazeera television in a rift with Qatar.

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt have sent Doha a list of 13 demands, including closing the state-funded Al Jazeera television and reducing ties to Iran, an official of one of the four countries said.

The U.N. Special Rapporteur on freedom of opinion and expression David Kaye said the move was a blow against media pluralism in the Middle East.

Mr Kaye said: “This demand represents a serious threat to media freedom if states, under the pretext of a diplomatic crisis, take measures to force the dismantling of Al Jazeera.

“I call on the international community to urge these governments not to pursue this demand against Qatar, to resist taking steps to censor media in their own territory and regionally, and to encourage support for independent media in the Middle East.”

7.13pm: Qatar is expected to hire Swiss lawyers in an attempt to sue the Gulf Arab states who cut economic ties with the country.

The three leading stets behind the economic blockade are Saudi Arabia, Bahrain and the United Arab Emirates.

The chairman of Qatar’s National Human Rights Commission told a press conference many Qataris quality for compensation.

“Some cases will be filed in courts in those three countries and in some courts that have international jurisdictions, like in Europe, related to compensation,” chairman Ali Bin Smaikh al-Marri said.

He did not reveal which Swiss firms would be employed.

The Empire State Building was lit in Qatar's colours

The Empire State Building was lit in Qatar’s colours. Getty Images

3.30pm: New York City’s Empire State Building has been lit up in burgundy and white to celebrate the 10th anniversary of Qatar Airways flying to the US.Qatar Airways is the state flag carrier of Qatar, which has seen flights to Saudi Arabia, Bahrain, Egypt and other Gulf nations grounded in recent weeks.

Qatar’s sovereign wealth fund in August bought a 9.9 percent stake in the company that owns the Empire State Building for $622 million.

12.30pm: The Gulf crisis has created chaos in the foreign exchange market for Qatari riyals, with the currency trading far below its peg to the US dollar this week.

At times, the riyal has been quoted by Qatari banks very near its peg of 3.64 to the dollar, at other times foreign banks have quoted it much lower. This week it traded between banks as low as 3.81, more than 4 percent below its peg – the lowest level this decade.

Normally, such a gap would suggest the central bank was abandoning the peg and allowing its currency to depreciate but this time the riyal’s drop is due to the way the diplomatic crisis has fragmented the foreign exchange market.

Many Gulf banks have suspended or reduced ties with Qatar, causing funds in the market to flow more slowly and inefficiently between onshore and offshore banks.

This has opened a chasm between onshore trade, where the Qatari central bank has continued to provide ample supplies of dollars at a rate of up to 3.6415 under its peg mechanism, and offshore trade, where jittery foreign banks are demanding a premium for buying riyals, pushing the currency lower.

“There’s definitely an arbitrage between offshore and onshore rates because of the uncertainty, and traders are taking advantage of the volatility,” said a senior treasury official at a bank in Abu Dhabi.

But the official, who like others in the region declined to be named because of political sensitivities, said there was no reason to think Qatar would need to take the risky and destabilising step of abandoning its peg.

“Qatar Central Bank will definitely defend the peg… It makes no sense for Qatar to de-peg. It won’t happen from an economic point of view. If it de-pegs at all, that would be due to political reasons.”

10.30am: The Gulf states which have cut ties with Qatar could ask their trading partners to choose between working with them and working with Doha, the UAE ambassador to Russia has said.”There are certain economic sanctions that we can take which are being considered right now,” Omar Ghobash told the Guardian.

He added that the expulsion of Qatar from the Gulf Cooperation Council was “not the only sanction available”.

The UAE, Saudi Arabia, Egypt and Bahrain have accused Qatar of funding extremism and have cut ties with the Arab state. Doha has denied the allegations.

Last week the four nations issued Doha with a list of demands aimed at restoring diplomacy.

Qatar has been told to cut alleged links to groups including the Muslim Brotherhood, close the broadcaster Al-Jazeera, and downgrade ties with Iran, which has been supporting Doha throughout the blockade with food supplies.

UAE ambassador to Russia Omar Ghobash

UAE ambassador to Russia Omar Ghobash. GETTY

“If Qatar was not willing to accept the demands, it is a case of ‘Goodbye Qatar’ we do not need you in our tent anymore,” Mr Ghobash said.He insisted that the UAE and its allies would impose the same standards that they are asking of Doha on themselves.

“So if we are to ask for the monitoring of Qatari financial transactions and its funding of terrorism then we would be open to the same idea,” he explained.

When asked whether the demand to close Al-Jazeera was a reasonable one, Mr Ghobash replied: “We do not claim to have press freedom. We do not promote the idea of press freedom. What we talk about is responsibility in speech.

“Freedom of speech has different constraints in different places. Speech in our part of the world has a particular context, and that context can go from peaceful to violent in no time simply because of words that are spoken.”

Qatar's Foreign Minster Sheikh Mohammed bin Abdulrahman Al Thani

Qatar’s Foreign Minster Mohammed bin Abdulrahman Al Thani and US Secretary of State Rex Tillerson. Getty

8.00am: Qatar’s Foreign Minster has rejected the Saudi-led bloc’s list of demands.Sheikh Mohammed bin Abdulrahman Al Thani said that there will be no negotiations due to the lack of evidence to support the claim that Doha funds terrorism.

Speaking after a meeting with US Secretary of State Rex Tillerson, Mr Al Thani said: “What has been presented by the countries of the blockade are merely claims that are not proved by evidence and are not demands.

“Negotiations require a real will by the other party and evidence to support its demands.

“The demands must be realistic and enforceable. Anything else is rejected.”

The US has called on the Gulf states to present a “reasonable and actionable” list of demands to Doha.

Gulf crisis explainedSaudi Arabia, Bahrain, the UAE and Egypt announced on June 5 that they were severing diplomatic relations with Qatar.

The Gulf nations accused Qatar of funding terrorism and of meddling in internal affairs within the GCC.Doha has denied the charges, insisting: “We do not, have not and will not support terrorist groups.”

Bahrain and Egypt both demanded that Qatari embassies in their countries closed within 48 hours, and recalled their own diplomats.

The UAE and Saudi Arabia gave Qatari citizens two weeks to depart, and ordered their citizens in Qatar to return home.

All four nations have now closed land, air and sea borders with Qatar.

Mr Trump escalated the row and suggested that the embargo was his idea.

On June 9 he said that “the time had come to call on Qatar to end its funding … and its extremist ideology”.

Neighbouring nations such as Turkey have stepped in to provide food and goods for Qatar, which relies heavily on imports.

A number of other nations have also cut ties with Doha.

The full list is: Bahrain, UAE, Saudia Arabia, Egypt, Yemen, Eastern government of Libya, Maldives, Mauritania and Senegal. Jordan and Djibouti have downgraded relations.

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British PM loses majority, faces pressure to resign — Who is now going to control the Brexit process?

June 9, 2017
AFPJune 9, 2017
Britain’s Labour leader Jeremy Corbyn called on Prime Minister Theresa May to resign after the election result (AFP Photo/JOHN THYS, Paul ELLIS)

London (AFP) – British Prime Minister Theresa May faced pressure to resign on Friday after losing her parliamentary majority, plunging the country into uncertainty as Brexit talks loom.

The pound fell sharply amid fears the Conservative leader will be unable to form a government and could even be forced out of office after a troubled campaign overshadowed by two terror attacks.

After being re-elected with an increased majority in the London commuter seat of Maidenhead, May said Britain “needs a period of stability” as it prepares for the complicated process of withdrawing from the European Union.

She said that while the full results had yet to emerge, her party seemed to have won the most seats and “it would be incumbent on us to ensure we have that period of stability”.

But Leftist opposition leader Jeremy Corbyn, whose Labour party surged from 20 points behind, urged May to quit, saying she had “lost votes, lost support and lost confidence”.

Former Conservative minister Anna Soubry, who just held onto her seat, said May was “in a very difficult place” following a “dreadful campaign”.

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With a handful of seats still to be declared, the Conservatives were predicted to win 319 seats, down from 331 in 2015 — yet another upset in a turbulent year since the EU referendum in June 2016.

They were mathematically unable to reach the 326 mark that would give them a majority, meaning they will have to form an informal or formal alliance to forward their agenda.

Labour are expected to increase their share from 229 to 260 seats, resulting in a hung parliament.

May, a 60-year-old vicar’s daughter, is now facing questions over her judgement in calling the election three years early and risking her party’s slim but stable majority of 17.

“It is exactly the opposite of why she held the election and she then has to go and negotiate Brexit in that weakened position,” said Professor Tony Travers of the London School of Economics.

Sterling fell nearly two percent against the dollar on the back of the exit poll, as investors questioned who was now going to control the Brexit process.

Early newspaper editions reflected the drama, with headlines such as “Britain on a knife edge”, “Mayhem” and “Hanging by a thread”.

In a night that threatened to redraw the political landscape once again, the UK Independence Party (UKIP), which won 12.5 percent of the vote two years ago and was a driving force behind the Brexit vote, was all but wiped out, hovering around two percent.

The pro-European Liberal Democrats, who have campaigned for a second EU referendum, increased their number of seats from nine, but their former leader Nick Clegg lost his seat.

Meanwhile the Scottish National Party of First Minister Nicola Sturgeon, which has dominated politics north of the border for a decade and called for a new independence vote after Brexit, was tipped to lose around 21 of its 54 seats.

Deputy leader Angus Robertson, one of the strongest SNP performers in the House of Commons, was an early casualty.

– ‘Pressure to resign’ –

May, who took over after last year’s Brexit referendum, began the formal two-year process of leaving the EU on March 29, promising to take Britain out of the single market and cut immigration.

Seeking to capitalise on sky-high popularity ratings, she called the election a few weeks later, urging voters to give her a stronger mandate to go into Brexit talks that are expected to begin as early as June 19.

Officials in Brussels were hopeful the election would allow her to make compromises, but this has been thrown into question by the prospect of a hung parliament.

“It creates another layer of uncertainty ahead of the Brexit negotiations,” said Craig Erlam, senior market analyst at OANDA currency traders.

Despite campaigning against Brexit, Labour has accepted the result but promised to avoid a “hard Brexit”, focusing on maintaining economic ties with the bloc.

Barely a month ago, the centre-left party seemed doomed to lose the election, plagued by internal divisions over its direction under veteran socialist Corbyn.

But May’s botched announcement of a reform in funding for elderly care, a strong grassroots campaign by Corbyn and the terror attacks, which increased scrutiny of her time as interior minister, changed the game.


“Even if she manages to get just enough seats it will be seen as a failure and she may indeed be under pressure to resign as leader quite quickly,” said Paula Surridge, senior lecturer at the University of Bristol.

– Terror in the campaign –

Britain has been hit with three terror attacks since March, and campaigning was twice suspended.

A suicide bomber blew himself up outside a pop concert in Manchester on May 22, killing 22 people.

Last Saturday, three assailants wearing fake suicide vests mowed down pedestrians and launched a stabbing rampage around London Bridge, killing eight people before being shot dead by police.

The attacks led to scrutiny over May’s time as interior minister from 2010 to 2016, particularly since it emerged that some of the attackers had been known to police and security services.

Labour seized on steep cuts in police numbers implemented as part of a Conservative austerity programme, although May insisted she had protected funding for counter-terrorism.

China’s Daily Yuan Fix Makes Biggest Leap in Five Months

June 1, 2017


Fix against dollar was up 0.8%, the latest sign of efforts to bolster the yuan since last week’s sovereign-debt downgrade

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People’s Bank of China

By Saumya Vaishampayan and Shen Hong
The Wall Street Journal

June 01, 2017

China’s central bank guided the yuan to its biggest one-day jump in roughly five months Thursday, the latest sign that authorities are seeking to bolster the yuan in the wake of the downgrade of the country’s sovereign debt by Moody’s Investors Service last week.

The yuan fix was 0.8% stronger than Wednesday’s, as China set the dollar’s daily midpoint for trading at 6.8090 yuan, compared with 6.8633 yuan. It was the yuan’s highest level since Nov. 10. The jump wasn’t entirely surprising, traders said: The yuan ended onshore trading Wednesday at 6.8210 to the dollar, its strongest point since Nov. 11, after a 0.6% surge that day.

Commerzbank’s model had predicted the fix would set the dollar at 6.8136 yuan, while a Shanghai-based senior trader with a domestic bank said his own model expected a fix of about 6.8100.

In setting the daily fix, the People’s Bank of China considers where the yuan ended against the dollar in the previous day’s onshore trading, the overnight movement of a basket of currencies and a “countercyclical” factor that was unveiled last week. Within China, the yuan trades in a tight band around that fix. In theory, it trades freely offshore, in major hubs like Hong Kong.

The central bank has intervened in the onshore market in recent days, traders say, directing state-owned banks to buy yuan and sell dollars. Without that, the yuan wouldn’t have become so strong, said the Shanghai-based trader.

“The key question for everyone now is when the PBOC will let this round of appreciation end,” the trader said. “These are quite uncertain times for yuan traders.”

As to why the PBOC is propping up the yuan, analysts say there are several theories. It could be meant to deter investors from betting the yen will decline following the Moody’s downgrade. Or it could be to help make China’s domestic bonds more attractive to foreign investors: The central bank has approved a bond-connect program between the mainland and Hong Kong.

In the offshore market, the yuan advanced 0.2% to 6.7309 against the dollar in the offshore market on Thursday, following a sharp rise the day before. Market participants say the Chinese central bank has likely been behind a surge in short-term borrowing costs for the yuan in Hong Kong, which has pushed the yuan sharply higher in recent days.

The cost for banks to borrow yuan from each other overnight in Hong Kong rose to 42.82% on Thursday from 21.08% on Wednesday. The Chinese authorities have pushed up these rates in the past 18 months to squeeze investors out of bearish bets on the yuan, analysts say.

While investors in the options markets are now paying up for contracts that protect against a rise in the offshore yuan in the next month, they still expect a decline over the longer run.

“With the cyclical peak in growth in the rear mirror, it is just a matter of time until the authorities need to get back to facilitating depreciation in the trade weighted currency,” Jason Daw, head of emerging markets foreign exchange strategy at Société Générale, wrote in a note.

Write to Saumya Vaishampayan at and Shen Hong at

India’s annual growth slows to 7.1%

May 31, 2017


© AFP | In this photograph taken on May 30, 2017, Indian labourers construct a cement water tank in Allahabad. India’s economic growth slowed to 7.1 percent for the 2016-17 financial year


India’s growth slowed to 7.1 percent last year, according to official data released Wednesday, weaker than analysts expected but still the fastest rate of any major economy.

GDP growth for the 12 months ended March 31 was well below a revised figure of eight percent for the previous year, and follows the government’s shock move last November to ban most of the currency in circulation.

“This is a sharper deterioration than what I expected,” Ashutosh Datar, economist at IIFL Institutional Equities, told AFP.

“The fourth quarter (6.1 percent) is a bit weaker than what I expected.”

However the country of 1.25 billion is still reporting faster growth than rival China, at 6.7 percent in 2016.

Prime Minister Narendra Modi has defended his move to remove all 500 (around $7.50) and 1,000 rupee notes from circulation as a necessary strike against corruption.

The government argues it will boost revenues by dissuading people from using cash, which makes it easier to avoid tax.

The move triggered massive lines outside banks in the weeks afterwards as authorities struggled to print replacement notes fast enough.

While the full impact of the note ban is still not known, analysts had expected a pick-up in the fourth quarter as consumers who had held back in the weeks after the cash ban stepped up spending.

Trump slams Germany’s US trade surplus — “The Germans are bad, very bad,” Trump was quoted as saying.

May 26, 2017

During meetings with EU leaders, US President Donald Trump threatened to curb the sale of millions of German cars in the US. In comments leaked to German press he said Germany was acting in a bad way.

Deutschland Autos Export (picture-alliance/dpa/I. Wagner)

While in Brussels Thursday US President Donald Trump told European leaders that Germany was being unfair with its trade arrangements, German media reported on Thursday.

“The Germans are bad, very bad,” Trump was quoted as saying by respected news weekly “Der Spiegel.”

“Look at the millions of cars they sell in the US. Terrible! We’ll stop that,” Trump said, according to sources inside who spoke with the magazine.

Similar complaints against Germany’s trade surplus at the Brussels meeting were reported by Bavarian daily “Sueddeutsche Zeitung.”

Trump reportedly made it clear that the reduction of the US trade deficit was a high priority for him, during a meeting with the President of the EU Council Donald Tusk and President of the EU Commission Jean-Claude Juncker. Other EU leaders joined the meeting later.

Juncker reportedly defended the Germans, saying free trade was a good thing for everyone.

$64 billion deficit

In 2016, Germany exported goods worth 253 billion euros ($270 billion) more than it imported.

This has given rise to criticism by the Trump administration, IMF chief Christine Lagarde and French President Emmanuel Macron. Trump’s top trade advisor, Peter Navarro accused Germany of exploiting a “grossly undervalued” euro to boost its exports. 

According to US figures government figures, Germany had a $64 billion trade surplus with the US in 2016.

Fact check: German-American trade

Trump has previously condemned German car-makers for importing cars into the US, threatening them with a 35 percent tariff.

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The remarks took place during a meeting with Jean-Claude Juncker and Donald Tusk on the sidelines of a Nato summit  CREDIT: REUTERS

“If you want to build cars in the world, then I wish you all the best. You can build cars for the United States, but for every car that comes to the USA, you will pay 35 percent tax,” Trump told German tabloid “Bild” in January in remarks translated into German.

“I would tell BMW that if you are building a factory in Mexico and plan to sell cars to the USA, without a 35 percent tax, then you can forget that,” Trump said.

In March Trump signed executive orders to initiate a large-scale review of the causes of the American trade deficits with some of its largest trading partners – including China and Germany – and order stricter enforcement of US anti-dumping laws to prevent foreign manufacturers from undercutting US companies by selling goods at an unfair price.

In April Germany’s finance minister rejected US claims that Germany’s trade surplus was a sign of unfair policies and called on the Trump administration to remain engaged in trade liberalization.

In public comments after Thursday’s meeting Tusk said the two sides agreed on a number of issues and reaffirmed counter-terrorism cooperation, but clashed on others.

Later in the day Trump met with NATO leaders and repeated calls for members of the military alliance to pay more, saying that payments must make up for “the years lost.”

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