The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site. Please see our Subscription Terms and Conditions.


All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.

Texas hedges won’t keep out the bears

After five consecutive 25-basis point interest rate increases by the US Federal Reserve in the second half of 2004 the year might have been expected to end with credit spreads lower, a sell-off in emerging-market debt and a slowdown of real-estate investments.

None of that has happened. Instead for now, much of the stress in financial markets is being felt in the foreign exchange markets. What the Asian central banks do next is of most immediate concern. With their mercantilist hat still on, and led by the Japanese and Chinese central banks, they have been buying dollar assets, especially US treasuries, as a way of supporting their export markets. With little domestic demand to speak of, exports have provided much of the growth for the Asian region. With the dollar weakening over the past two years, though, observers have started to wonder when the investment pain of buying low-yielding US assets with a poor exchange rate might prompt one or more central banks to cut their exposure.

There is little sign of this happening yet. The latest information on the US Treasury's TIC data, from October, which measures foreign holdings of US assets, shows continued interest in buying dollars.

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree