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The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

If trading dollars is outlawed, only outlaws will trade dollars. This, to adapt a slogan about gun control from America’s National Rifle Association, increasingly describes Venezuela’s foreign-exchange market. New rules are pushing more currency traders into the black market, where they face lengthy jail sentences and heavy fines for helping others to finance non-priority imports or save in hard currency.

Late last year, the government announced a “unification” of the country’s notoriously complex currency control system, replacing a four-tiered structure with a three-tiered one. The first two tiers (BsF4.3:US$1 for priority imports and the public sector, and BsF5.4:US$1 for other purposes) are official and tightly controlled. The growing third tier is the illegal black market, where prices are reported to hover in the BsF8-10:US$1 range. This deeply opaque, unofficial tier is the one that businesses increasingly use to set prices for imported goods.

Read more at Financial Services Briefing: “In the shadows” (February 9th)

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The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers. This week, the article of the week comes from Risk Briefing, a sister service to Financial Services Briefing.

Exchange-rate management was a contributor to the financial and economic crises that struck East and South-East Asia in the late 1990s. This time around, East Asia’s currencies are being managed differently. Notwithstanding an abundance of intervention, as reflected in growing reserves balances, these countries’ central banks have allowed the market to play a role in the currency’s value, and have not given speculators a threshold to bet against. The upshot is greater resilience in the event that boom turns to bust.

One way to assess flexibility in the currency regime is to consider the exchange-rate’s volatility against the “naturalness” of the distribution in its daily (or weekly, or monthly) changes. A combination of a volatility measure and a “naturalness” measure can give an indication of the underlying regime flexibility. On this measure, East Asian currency regimes are more flexible now than they were at the time of the 1990s crises.

Read more at Risk Briefing: “East Asian crisis resilience improves” (January 4th)

The majority of data and analysis at Financial Services Briefing is available only to subscribers. Each week, a small share of content from the service is made available to non-subscribers.

For the last three years, global finance has been rocked by sub-prime mortgages, bank failures and sovereign-debt scares. But the world’s foreign exchange markets have nonetheless grown by leaps and bounds. That is the surprising conclusion of a survey of the market published on December 1st.

The study, the Triennial Central Bank Survey for the Bank for International Settlements (BIS), shows that the foreign exchange market expanded by 20% to average daily trading of US$3.98trn in April 2010 from three years before. It also documents the increasing role of non-traditional financial traders. Finally, it provides evidence of the continued domination of the market by traders in the UK, US and a handful of other established centres.

Read more at Financial Services Briefing: “Resilient forex” (December 1st)

Every three years, the Bank for International Settlements surveys the global currency market. Its latest report shows that the average daily turnover in the foreign exchange market reached a whopping US$4trn in April 2010, up 20% from April 2007. The most popular currencies remain the US dollar, euro and Japanese yen, which largely maintained their overall share of trading over the past three years.

Deeper digging into the results uncovers some interesting trends in certain currency pairs. Facing moribund growth at home, investors from the largest developed economies are looking to emerging markets for returns, fuelling rapid growth in, for example, the exchange of American dollars for Brazilian reais and Chinese yuan. Another particularly fast-growing pair, the yen-Australian dollar, reflects a growing appetite for commodities. By contrast, one of the only pairs to see trading volumes fall in recent years is the august “cable”, or trade between US dollars and British pounds.

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