2011 ANNUAL SUPPLEMENT FOREIGN EXCHANGE

Foreign Exchange 2011

Déjà Vu All Over Again ome analysts say that 2011 is beginning to look a lot like 2008, with Europe’s debt crisis morphing into a solvency crisis with global ramifications. So far, the 02 S —the world’s largest trading market, with a daily volume Same Old, Same Old of $4 trillion—continues to function smoothly. That could change suddenly, however, with The dollar retains its status as the euro on the verge of an existential crisis. chief reserve currency. With ring fences going up across Europe and the global economy sputtering, China is making its move onto the global financial stage with an internationalization of the renminbi that is happening faster than most expected. It will be years before the “people’s cur- rency” rivals the greenback (and the euro, if it is still around) as a world reserve currency. 04 However, the handwriting is on the wall: There were more bonds issued in renminbi in Currency Wars the third quarter of 2011 than in euros. Battle tactics change with Nonetheless, the dollar remains king of the hill when it comes to risk aversion and the global slowdown. preservation of capital. Despite warnings about the dismal outlook for the US economy from Federal Reserve chairman Ben Bernanke and others, the dollar remains the safe haven of choice among central bankers and global investors alike. While the yen and the Swiss franc have also been havens in the storm, they are losing 06 their appeal. The Bank of Japan (acting on behalf of the powerful ministry of finance) Is The Euro Crumbling? spent a record $59 billion on August 9 on currency intervention to keep the yen from Europe’s leaders need to make rising. Switzerland put a cap on the franc by pegging it to the euro, which has been falling. fundamental reform. The threat of rising protectionism was underlined by the US Senate’s vote last month to move ahead with a bill to punish China for keeping the value of its currency low. The People’s Bank of China said passage of the bill could lead to a trade war. Fortunately, the bill is unlikely to advance in the House of Representatives. 09 The tables have turned from a year ago, when the House voted 348 to 79 to approve Lofty Ambitions For The Renminbi the Currency Reform for Fair Trade Act, which would have authorized the commerce China makes strides in department to impose duties on imports from countries with undervalued currencies. internationalizing its currency. The representatives acted in the knowledge that the legislation faced tougher going in the Senate. The currency markets are getting a lot of attention, and most of it is deserved. Those who fail to learn from the past are bound to relive it. The “Smoot-Hawley Tariff Act of 11 1930” had a negative effect on the economy as US exports were cut in half. Should Who’s Who protectionism take hold, this pattern looks set to repeat itself, and the consequences Who’s who in foreign exchange. for world trade could be devastating.

Gordon Platt Contributing Writer Global Finance

1

Foreign Exchange 2011 Same Old, Same Old The US dollar will remain the world’s reserve currency of choice as long as there is no alternative. By Denise Bedell

and secured global reserve currency may Chatterjee, analyst at Capital, also be an option to avert a catastrophe noted that central in emerging caused by any single country.” markets—which account for 71% of total reserve currency accumulation—have “EXORBITANT PRIVILEGE” been reducing allocation into the euro There are many benefits gleaned by reserve this year while their dollar allocations currency countries, and none glean more have seen little change. There are also benefits that the US. When the peg was changes in how emerging markets cen- abandoned in 1971 and the dollar retained tral bankers are managing diversification. its reserve currency status—under then- “While accumulation of USD remains president Richard Nixon—the French healthy and unchanged, the GBP and the finance minister Valéry Giscard d’Estaing JPY have been beneficiaries of the slower coined the term “exorbitant privilege” to pace of [euro] accumulation,” he said. describe the unfair playing field between Worldwide, dollar accumulation is up: here have long been calls for a the dollar and other currencies. the US currency made up 54% of overall new currency to take the place Reserve currency countries benefit in a accumulation, up from around 49% since T of the US dollar as the world’s number of ways, including cheap borrow- the credit crisis, Chatterjee noted. The reserve currency of choice—in the ing thanks to high demand for reserve cur- IMF’s Currency Composition of Official recent past these calls have been blasted rency government bonds; wide-reaching Foreign Exchange Reserves (COFER)— through a bullhorn courtesy of Chinese seigneurage—or the differential between the data upon which the Barclays research officials wanting the yuan renminbi to the value of goods purchased with bank is based—showed slowing reserve accu- take its place. notes and the cost of printing and distrib- mulation in general going into the sec- Such cries have been made before, and yet nothing has risen to oust the dollar since it first gained prominence as the “The GBP and the JPY have been premier reserve currency after the second world war—with its peg to gold under beneficiaries of the slower pace the Bretton Woods system. When the dollar weakened in the lat- of [euro] accumulation” ter half of the 1970s, similar calls were —Aroop Chatterjee, Barclays Capital shouted from the rooftops, but the dollar held sway. Again in the 1990s and early uting those bank notes; and a less-urgent ond half of the year by the world’s central in the new millennium calls were made need to hold high reserves. banks. afresh, but availed little. But that exorbitant privilege will Notes Jason Trennert, managing partner Most recently, China has signaled its remain as long as no other currency and chief investment strategist at Strategas intent to challenge dollar dominance is considered enough of a bulwark to Research Partners: “The US is bailed out with the renminbi—which the country take its place, and that has yet to hap- by fact that it is a reserve currency. It can indicated is heading for full convert- pen. Although the renminbi may indeed get away with a lot of bad behavior.” He ibility. When the US was downgraded present a viable alternative at some point, says it is the best house in a bad neighbor- by rating agency Standard & Poor’s in for the foreseeable future the dollar will hood. “But that house could wind up on August, Xinhua, the Chinese state news remain preeminent. The closest rival was fire, too.” Trennert adds that the US is still agency, was quick to make use of it. The the euro, but since the crisis began in the the largest fiat currency globally: “But the agency said in a statement: “International region, euro currency reserve accumula- fact that gold [prices] continue to go up supervision over the issue of US dollars tion has been decreasing. shows there is not a lot of confidence in should be introduced, and a new, stable In a recent research report, Aroop that fiat currency.”n

2

Foreign Exchange 2011

Currency Wars Battle Tactics Change With Global Slowdown. By Gordon Platt

hen the global economy seemed Battle tactics may have changed, but decides on foreign exchange interven- securely on track for a steady the currency wars have not ended. Japan tion, and the Bank of Japan executes W expansion last year and early has increased its currency “war chest” to transactions on behalf of the powerful this year, central banks intervened mas- more than $500 billion to keep the mar- ministry of finance. Therefore, the govern- sively in the foreign exchange market to limit ket wary of potential intervention to sell ment needs yen funding to sell yen in the appreciation of their currencies to maintain a the yen, says Masafumi Yamamoto, chief foreign exchange market. competitive edge in global markets for their foreign exchange strategist at Barclays “The main reason for lifting the limit, in countries’ exporters. The nature of these Capital in . The Bank of Japan’s total our view, is to show that Japan has suf- ficient room for yen-selling intervention, if needed,” Yamamoto says. This doesn’t Chandler, Brown mean that the Japanese government will Brothers Harriman: be stepping in soon to sell the yen, but The lingering US and European crises are it will do so when large yen appreciation casting a pall over causes significant deterioration in the global capital markets country’s economic outlook and share prices, he says. Amid a huge sell-off in emerging mar- ket assets in late September, central banks across the developing countries— including Poland, Brazil, Russia, India, South Korea and Indonesia—were forced to intervene to keep their currencies from plummeting. Weakening currencies threat- ened to worsen inflation problems at a time when easier monetary policies seemed to be called for.

NEW MEASURES “The lingering crisis in the US and Europe so-called “currency wars” has changed dra- intervention during 2003 and 2004 was continues to cast a pall over global capital matically as a result of worries about slowing around that amount. markets,” says Marc Chandler, global head growth globally in the wake of the US and Japanese finance minister Jun Azumi of currency strategy at Brown Brothers European debt crises. Now many central said the government would increase the Harriman in New York. “Policymakers are banks are intervening to prop up their cur- limit of financing bill issuance for inter- responding with new monetary and fiscal rencies amid a rush to the dollar. vention to $2.2 trillion. The government measures.”

4

Foreign Exchange 2011

Prudential macroeconomic policies in work against policymakers going down lawmakers say it remains undervalued by Brazil, for example, have been backed the politically sensitive road of actively 25% to 40%. Opponents of the bill say it up with the beginning of an easing cycle, pushing their currencies weaker, the would create a trade war. which will likely continue to weigh on the report notes. Meanwhile, the International Monetary real, Chandler says. Turkey has also begun Fund and World Bank have both argued easing monetary policy, and Hungary is ASIAN APPRECIATION that the global economy is in a danger likely to begin an easing cycle for monetary All other things being equal, Asian cen- zone. “Increasing the hunt for safety and policy in the coming months, he says. tral banks in the medium term should be liquidity are reports that the IMF is looking The deterioration of confidence has hit more comfortable allowing some currency to step up its lending capacity, as it fears emerging markets and, to some extent, appreciation if the Chinese renminbi con- that it may have to increase its ability to G10 commodity currencies hard. It is dif- tinues to trend higher. The benefits to help countries with worsening credit prob- ficult to see this trend changing relative China of an appreciating currency include lems,” says Jean-Pierre Doré, corporate to the dollar until the European crisis sta- a disinflationary impetus, domestic growth foreign exchange dealer at Western Union bilizes, according to a report by Barclays rebalancing, slower foreign exchange Business Solutions in Edmonton, Canada. Capital. In the long run, however, “fac- reserve accumulation and a buildup of The IMF is seeking to double its lending tors that led to the bout of accusation political goodwill with the G20 countries, facilities to $1.3 trillion and make perma- and counter-accusation in 2010 about Barclays Capital says. nent an emergency lending facility put in place in 2008. The cost of insuring Chinese bonds against default is rising and is about dou- “Increasing the hunt for safety ble the cost to insure the debt of Germany, and liquidity are reports that a country currently in the grips of the euro- zone crisis and facing the prospect of bail- the IMF is looking to step up its ing out its neighbors, Doré says. China’s latest purchasing managers’ index fell lending capacity” below the 50% level. “Further, there are —Jean-Pierre Doré, Western Union Business Solutions downward projections to China’s GDP, with expectations of 7.7% growth for 2012, well below previous projections of currencies being effectively devalued for As Global Finance went to press, the US 8.3%, as its exports to developed markets domestic purposes at the cost of other Senate was preparing to vote on legislation decline and inflationary pressures ease,” economies may return once conditions designed to punish China for manipulating Doré says. stabilize,” the report says. Monetary pol- its currency. A key provision would instruct In another battle in the currency wars, icy is likely to loosen further in the major the Commerce Department to treat under- the Swiss National Bank set a cap on economies, and some central banks are valued currencies as a subsidy under US its soaring exchange rate in September, running out of options for further easing trade law, enabling companies to seek announcing that it was prepared to buy except via exchange-rate depreciation, countervailing duties against imports. The foreign currency in unlimited quantities to it adds. Obama administration said it was review- keep the euro above 1.20 Swiss francs. Economic problems in developed ing the bill. “We share the goal of achieving “The current massive overvaluation of the economies remain acute, adding incen- further appreciation of China’s currency,” Swiss franc poses an acute threat to the tive to move liquidity flows from developed White House spokesman Jay Carney said. Swiss economy and carries the risk of a economies to faster-growing developing The Economic Policy Institute estimated deflationary development,” the SNB said economies, according to the Barclays in a recent report that the US has lost 2.8 in a statement. report. “The global growth slowdown and million jobs from 2001 to 2010 because The risk is that countries will continue shifts in portfolio and capital flows suggest of the trade deficit with China. President to resort to unilateral actions to combat to us that maintaining export competitive- Barack Obama is urging a $447 billion pro- the transmission of global stresses into ness will be an overriding near-term objec- posal to stimulate job creation. Backers of domestic economies rather than take a tive,” it says. the China currency bill say it could create coordinated global approach to tackling However, the case for central banks to more than 1 million jobs without massive the crisis, according to analysts at Brown actively devalue their currencies is unim- government spending. Brothers Harriman. “Thus, we expect pressive. Slowing but still robust Asian The value of the renminbi has risen market stress to remain elevated amid GDP and export growth and above- about 3% against the dollar so far this year, the recent sharp deterioration in senti- historical-average inflation probably and almost 30% since 2005, but some US ment,” they said. The currency wars are far from over. n

5

Foreign Exchange 2011

Is the Euro Crumbling? Major reform is needed, but whether the political will is there to make large scale changes remains to be seen. The alternative may be the end of the eurozone as it now exists. By Gordon Platt

urope’s leaders have been danc- buying time, but they will reach a point of multinational companies today cannot ing around major economic where the political pressures are too great keep pace with the events in global cur- E and financial problems in the to continue with the euro experiment as is.” rency markets and face foreign currency eurozone—making minor changes to Koester predicts that there will be a risks to which they don’t have complete address specific ills rather than opting restructuring of the euro some time next visibility in a timely fashion,” Koester says. for deep seated reform. The question is year. “A smaller group of countries, includ- Many corporations were stunned in whether a fundamental solution is in the ing Germany, France, the Netherlands and September when the Swiss National Bank works and what the alternative will be. Austria, will be included in the new euro,” (SNB) set an exchange rate cap on the G20 ministers promised “a strong he says. He has been warning of a poten- Swiss franc, in effect pegging it to the euro, and coordinated international response tial euro breakup, he adds, for the past to stop Switzerland’s economy from sink- to address the renewed challenges fac- two years. ing into recession. The central bank said it ing the global economy,” including the Although Koester’s views on the would no longer accept an exchange rate European debt crisis, at the meeting in future of the euro have been echoed far Washington in late September of the and wide, they are not universally held. International Monetary Fund and World Opponents of this view are just as vocal in Bank. They noted that the eurozone was their defense of the future of the eurozone. working to expand the 440 billion euro According to the Barclays Capital Global ($600 billion) bailout fund for Europe’s Macro Survey conducted in September, debt-burdened countries. one in four (24%) of investors believe the Amid fears over a possible Greek European debt crisis will result in a breakup default, the European Central Bank (ECB) of the euro area. A much greater num- this summer began an emergency opera- ber (60%) of respondents polled believe tion to buy Italian and Spanish government that fiscal union will eventually take place, bonds to keep the crisis from spreading. although the majority of those believe it will Nevertheless, some analysts have become come only after massive monetization of significantly more bearish about the euro sovereign debt by the ECB. and many of them expect the situation in the eurozone to continue to deteriorate. SWISS PEG STUNNER Wolfgang Koester, founder and CEO of In June 2010, FiREapps announced an corporate FX solution provider FiREapps, early warning system for a euro breakup says a potential euro breakup could hap- scenario. The EU-RX solution provides pen quickly. “Once one country pulls out, enterprise-wide risk transparency by cur- it’s over,” he says. “Eurozone leaders are rency and by country. “CEOs and CFOs

6 Koester, FiREapps: When one country pulls out of the euro, it is over

Foreign Exchange 2011

below 1.20 francs to the euro. “In the short run the SNB is “The SNB will enforce this minimum rate with the utmost determination and is bound to defend [the Swiss prepared to buy foreign currency in unlim- franc] robustly, meaning that ited quantities,” SNB chairman Philipp Hildebrand said. the Swiss franc is a much less The dollar has become a more attrac- tive hedge for euro area risks because of attractive hedge” the floor imposed by the SNB, says Paul —Paul Robinson, Barclays Capital Robinson, head of Global FX strategy at Barclays Capital in London. The peg The dollar has been weak because of both to enable the eurozone to raise funds in “might not hold in the long run, but in the monetary policy and the structural problems the capital markets for financing loans to short run the SNB is bound to defend it in the US, according to Robinson. member states—will prove enough to sta- robustly, meaning that the Swiss franc is While the relatively hawkish stance the bilize the situation. a much less attractive hedge,” Robinson ECB has taken over the past year or so The lower house in the Bundestag, says. “Foreign exchange is a zero-sum has been a crucial support for the euro, the German parliament, voted in favor of game, so some other currency must the likelihood of a rate cut has increased expanding the powers of the bailout fund, benefit, and we do not agree that it is an significantly, he says. as agreed at the European summit meet- alternative European currency such as the ing in Brussels in late July. Germany has British pound or the Norwegian krone. The BAILOUT FUND LIMITATIONS benefited greatly from expanded trade dollar looks far more attractive.” There are two main problems facing the since the euro was introduced, says Dennis Until recently, many investors have been euro area in the short run, Robinson says. Gartman, editor and publisher of The frustrated by the resilience of the euro First, many investors think that a restruc- Gartman Letter advisory service. “However, against the dollar, given all the problems turing of Greek debt is only a matter of Europe’s problems have not been solved in Europe, Robinson says. European poli- time. Second, there is increasing pressure with the expansion of the ECB’s and the cymakers have generally done what was on the way for Spain and more particularly EFSF’s balance sheets; they’ve simply necessary to stabilize concerns in the short Italy, and the market is not convinced that been papered over, and ‘papering’ is run, he says. What’s more, the European the European Financial Stability Facility always and everywhere a temporary and Central Bank has kept the anti-inflation faith. (EFSF)—which was created in May 2010 stopgap measure,” he says. n

GREEK EXIT CALL is more costly and painful than an orderly and ouriel Roubini, co-founder and chair- civilized breakup.” man of Roubini Global Economics and While some analysts have estimated that Nprofessor at the Stern School of Business the cost of exit from the eurozone could be as at New York University, says it is time for Greece high as 40% to 50% of gross domestic product to default in an orderly manner on its public debt, for the country that is leaving, Roubini says exit the eurozone and return to the drachma to “such estimates appear to be vastly exaggerated restore solvency, competitiveness and growth. and based on utterly flawed assumptions; losses “Default and exit will be painful and costly, could be much smaller if the process is orderly, but the alternative of a decade-long deflation if official support is maintained, if debts are and depression would be much worse, eco- converted in an orderly manner into the new nomically, financially and socially,” Roubini local currency, and if sharp currency deprecia- says in an analysis distributed to select media. tion rapidly restores economic growth.” Nouriel Roubini The risk that a Greek default and euro- BROKEN MARRIAGE zone exit will lead to high inflation or even Greece can exit the monetary union in a disciplined manner if hyperinflation in Greece is also vastly exaggerated, Roubini says. systematic mechanisms are used and appropriate official finance “The same claims were made about Argentina when it defaulted is provided, Roubini says. “Like a broken marriage that requires and moved to a floating rate,” he says. “But even in a country a breakup, it is better to have rules—divorce laws—that make like Argentina, with a long history of inflation and hyperinfla- separation orderly and less costly to both sides,” he says. “Being tion, the move to a float did not lead to hyperinflation, as some stuck in a marriage of convenience that is not working any longer scaremongers had wrongly predicted.” n

87

Foreign Exchange 2011

China’s Lofty Ambitions For The Renminbi The Chinese government continues to make strides in internationalizing its currency. By Gordon Platt

very long march starts with a single and trading volume and is step. China has taken many steps now being used for busi- E toward the eventual globalization ness transactions in multiple of the renminbi. Full convertibility is around offshore locations, including the corner. Hong Kong, , South Since it was introduced in July 2010, Korea, Australia and other the offshore renminbi market has been areas around the world,” the the fastest-growing currency market in the CME explained. “Accordingly, world, according to HSBC. “This growth is a need for capital risk-man- being driven by China’s desire to interna- agement tools for the Chinese tionalize its currency and ultimately create currency has emerged.” an alternative to the dollar as the world’s The CME’s dollar/renminbi reserve currency,” the bank noted in a futures contracts are offered September report. in standard and E-micro sizes Chinese authorities have recently wid- (one-tenth the size of the stan- ened the channels for renminbi to flow, not dard foreign exchange futures) just out of China but, just as importantly, and are quoted in conventional back in again, HSBC says. As it becomes interbank foreign exchange easier to invest offshore renminbi back into market terms. the mainland, the growth in cross-border The BIS reports that $21 bil- circular flows of renminbi will reinforce lion in renminbi-linked deriva- organic growth and can also be consid- tives was traded each day Qu, HSBC: Domestic demand should support 8.5% ered a form of capital account liberaliza- in 2010, most of which took to 9% growth in the coming quarters tion, it says. place off of exchanges. Signs of eventual expansion of the meeting with Chinese vice premier Wang offshore renminbi market beyond Hong Qishan, who was in London for trade talks, NEW CHANNELS OPEN Kong—perhaps into Singapore and Osborne said: “We discussed the strong Earlier this year the state-controlled Bank London—in the coming year suggest that private-sector interest in developing the of China introduced trading in renminbi the pace of development will not slow any- offshore renminbi market in London. We in the US market for the first time. The time soon, according to HSBC. will work together to support the market’s bank limits the amount of renminbi that further development.” can be converted by a US customer to FOREIGN TRADING GROWS In the US, derivatives exchange firm $4,000 a day, but there are no restrictions UK Chancellor George Osborne said in the CME Group was planning to intro- on the amount that can be converted by September that China and Britain are duce dollar/renminbi futures on October businesses. US citizens are now able to likely to develop an offshore trading hub 17, 2011—as this issue of the maga- open FDIC-guaranteed accounts in the in London, which is the world’s largest zine went to press. “The renminbi has bank by converting their deposits into the center for foreign exchange trading. After experienced rapid growth in deposit Chinese currency.

9

Foreign Exchange 2011

Saxo Bank, which specializes in online billion pilot renminbi foreign direct investment PBOC said the dollar, euro, Japanese trading and investment, announced in (RFDI) initiative. Hong Kong companies are yen and South Korean won would September that its clients are now able expected to use the RFDI program to invest dominate the basket. The Singapore to trade the offshore renminbi on its trad- in mainland securities using renminbi instead dollar, Malaysian ringgit, Russian ruble, ing platforms. The bank offers streaming of Hong Kong dollars. Australian dollar, Thai baht and Canadian prices on ticket sizes up to $3 million The renminbi was a more popular cur- dollar would be included in lesser and larger trade sizes are available on a rency for companies issuing bonds than amounts, it added. request-for-quote (RFQ) basis. Renminbi was the euro in the tumultuous third quar- “As China continues efforts to interna- trade settlement has now been rolled out ter of this year, according to Dealogic. tionalize its currency, the market is rap- globally—allowing companies anywhere in There were $31 billion of renminbi- idly increasing, not just in size, but also in the world to settle trade transactions using denominated corporate bonds issued in depth and breadth,” according to HSBC’s the Chinese currency. the quarter, compared to $26 billion in report on the market. “The rapid rise of the euro-denominated bonds. offshore renminbi has taken the world by GLOBALIZATION GROWS As the Chinese currency becomes more surprise,” it noted. “The development of the offshore ren- widely used around the world, there will minbi [cross-currency] market is inte- be less need for China to hold US dol- ALTERNATE RESERVE gral to China’s broader strategic plans lar assets. China’s trade could also get CURRENCY to internationalize and turn the renminbi a boost. Renminbi-settled trade now The world’s second largest economy and into a viable reserve currency,” says Claus accounts for around 8.6% of China’s trade biggest exporter, China has big ambitions Nielsen, head of trading at Saxo Bank, settlement, up from only 1% a year earlier. for its currency. The offshore renminbi based in . is “the world’s most important new cur- McDonald’s and Caterpillar were the first ACTIVE CENTRAL BANK rency market,” HSBC says. “We expect US nonfinancial companies to issue debt MANAGEMENT [the Chinese] authorities to continue their priced in renminbi in the Hong Kong mar- The People’s Bank of China (PBOC) has drive to make the renminbi ultimately a fully ket—known as dim sum bonds. Unilever raised interest rates three times since convertible, deliverable and international and Volkswagen have also launched offered January—pushing the one-year deposit reserve currency alternative over the com- dim sum bonds, and other companies have rate to 3.5% and the one-year lending rate ing years.” announced intentions to do the same. to 6.56%. “We believe the tightening cycle Despite some market commentary to the contrary, China’s economy remains on course, according to Qu. He says fears “The development of the offshore of a hard landing for China’s economy are unwarranted. “Still resilient domestic renminbi [cross-currency] market demand is sufficient to support around 8.5% to 9% growth in the coming quar- is integral to China’s broader ters,” he says. “Investment growth has strategic plans to internationalize been stronger than expected so far and will continue to find support from over and turn the renminbi into a 100,000 ongoing investment projects, public housing construction and resilient viable reserve currency” consumer spending.” —Claus Nielsen, Saxo Bank Qu says consumer spending will hold up well, thanks to two years of strong wage Mainland Chinese companies are also is approaching an end; the peak of infla- growth and a labor market that remains expected to issue more yuan-denominated tion in July and the slowdown of growth tight. “Even as export growth softens bonds in Hong Kong, following regulatory support our call of zero rate hikes for the further in coming months, China is less changes announced by a Chinese State rest of this year,” says Qu Hongbin, chief dependent on net exports, whose contri- Council vice premier—Li Keqiang—on a economist for Greater China at HSBC in bution to GDP growth was almost zero in visit to the special administrative region Hong Kong. the first half of 2011,” he says. in August 2011. Dim sum issues were The central bank announced in August The pace of internationalization, devel- previously limited to Chinese financial insti- 2011 that it would manage the renminbi opment and growth of the market will tutions and non-Chinese companies. more actively against a basket of curren- remain very rapid and may continue to The offshore renminbi market was further cies, instead of just the dollar, and allow outpace market expectations for some liberalized with the establishment of a $3.1 market forces to play a bigger role. The time, according to HSBC. n

10

Foreign Exchange 2011 Who’s Who Who’s who in foreign exchange. By Gordon Platt

MOHAMED EL AROUSSI MELANIE WONG 1996 and previously was a senior trader for Head of FX desk Managing director, head of the client desk at Lloyds Bank. He holds an Arab African International Bank FX sales, Asia BNY Mellon MBA in finance from IBMEC. Mohamed El Aroussi has been head of the foreign exchange desk at Arab African In 2007, Melanie Wong relocated from New CARLOS EDUARDO International Bank (AAIB) in Cairo since York to Hong Kong and began raising the MACCARIELLO Product director for foreign 2008. AAIB is one of the biggest market FX profile of BNY Mellon. She selectively exchange makers in trading the dollar against the assembled a local team that employs a pro- Banco Itaú Unibanco Egyptian pound. El Aroussi writes market active, client-centric relationship manage- Carlos Eduardo Maccariello is product reviews and FX reports for ment style. She built upon her knowledge of director for foreign exchange at Banco the bank from both technical and funda- the subtle differences among the countries Itaú Unibanco, among other responsibili- mental perspectives. and cultures in the region and the whole ties. He joined Banco Itaú in 2002 and He holds a bachelor of commerce degree BNY Mellon Asia-Pacific presence, expand- was previously director of receivables at from Cairo University, where he majored ing the reach of the bank’s client base of FX Banco Safra. He holds a bachelor degree in accounting. users, including central banks, sovereigns, in accounting sciences from PUC. [email protected] investment managers, hedge funds and multinational corporations. ERIC BOMMENSATH JAMIE THORSEN [email protected] Managing director, head Executive managing director of fixed income, currencies BMO Capital Markets and commodities, and head SIMON DERRICK of trading, EMEA Barclays Capital Jamie Thorsen heads global Managing director, chief currency strategist foreign exchange operations in Canada, the BNY Mellon Eric Bommensath is head of fixed income, US and Europe for BMO Capital Markets currencies and commodities, and head and is responsible for the firm’s capital mar- Affable and prolific, chief currency strate- of trading in Europe, the Middle East kets activity in China. She currently serves gist Simon Derrick has led his research and Africa, at Barclays Capital. He joined on the Bank of Canada’s FX Committee and team to a high level of visibility and wide the bank in London in 1997 as head of was on the FX Committee of the Federal breadth of media coverage this year. His derivatives, Europe. A French national, Reserve Bank of New York for 17 years. astute currency forecasts are peppered with Bommensath studied science at École [email protected] charts generated from iFlow, BNY Mellon’s Polytechnique in and engineering at interactive, multi-asset-class research tool. École Ponts et Chaussées. FIRAS ASKARI Derrick’s economic commentaries—on the [email protected] Managing director, foreign simmering eurozone crisis, for example— exchange trading BMO Capital Markets are consistently insightful. MARC CHANDLER [email protected] Global head of currency strategy Firas Askari is responsible for Canadian dol- Brown Brothers Harriman lar trading globally at BMO Capital Markets JOSÉ AUGUSTO DURAND and heads the firm’s foreign exchange Director, client desk and Marc Chandler joined Brown Brothers foreign exchange desk sales and trading group in London. He is Banco Itaú BBA Harriman in 2005 as global head of cur- a former president of the Financial Markets rency strategy. Previously, he was the chief Association of Canada and has served on José Augusto Durand is director of the client currency strategist for HSBC Bank USA the Bank of Canada’s FX Committee. Askari desk and foreign exchange desk of Banco and Mellon Bank. Chandler is an associate joined BMO in 1996 and assumed his cur- Itaú BBA, which provides corporate, trea- professor at New York University, where he rent position in 2004. sury, international and teaches international political economy. [email protected] services in Brazil. He joined Banco Itaú in [email protected]

11

Foreign Exchange 2011

DEREK SAMMANN BEN McMILLAN ZAR AMROLIA Managing director, financial products and Global head of FX, institutional banking Global head of foreign services and markets exchange CME Group Commonwealth Bank of Australia Deutsche Bank

Derek Sammann is managing direc- Ben McMillan joined Commonwealth Zar Amrolia is global head of foreign tor, financial products and services, at Bank of Australia in August 2008 exchange in the global markets division of CME Group, where he is responsible for and is responsible for FX trading and Deutsche Bank, based in London. Amrolia the interest rate, equity and FX product institutional sales globally. He began was named global head of foreign exchange lines. He previously served as manag- his career at Bankers Trust in Sydney in 2006. He joined Deutsche Bank in 1995 ing director, global head of FX products, in 1998 after completing a bachelor from Credit Suisse First Boston. From after joining CME in 2006. Before that, of commerce degree in finance and a 2000 until 2004, he was co-head of for- he was managing director, global head of BS in mathematics from the University eign exchange at Goldman Sachs. Amrolia FX options and structured products, at of New South Wales. Prior to joining is a member of the foreign exchange com- Calyon Corporate and Investment Bank, Commonwealth Bank, McMillan worked mittees sponsored by the Federal Reserve based in London. at Barclays Capital in London. Bank of New York and by the Bank of England. ANIL PRASAD PETER SOH He also chairs the global FX division of the Global head of FX Managing director and Association for Financial Markets in Europe and EM local markets head of foreign exchange/ Citi commodities (AFME). DBS [email protected] Anil Prasad is global head of FX and EM Peter Soh was appointed head of foreign local markets at Citi, based in London. He exchange/commodities at DBS in 1996. STERGIOS PANTOSTIS began his career with Citibank India in 1986 He joined DBS in 1989 and was named Co-head, global markets trading and relocated to New York in 1988 to work managing director in 2005. Soh has been Eurobank EFG on the currency and metals options desk. instrumental in building a world-class foreign In 1992 he was named head of its options exchange team with a strong regional pres- Stergios Pantostis co-heads the global business. Prasad moved to London to head ence in spot trading of the US dollar against markets trading division at Eurobank EFG, Citi’s interest-rate options business in 1996. the Singapore dollar and in non-deliverable based in Athens. In FX his group operates He left Citi to work in proprietary trading forwards. in the spot and derivatives markets, with at NatWest Capital Markets in 1997, then He also expanded DBS’s treasury and a main emphasis on Southeastern and rejoined Citi in 2000 as regional head of markets capabilities in South Korea and Central Europe. Pantostis joined the group CEEMEA trading and was named head of Indonesia. A Singaporean, Soh holds a in 2002 and headed the derivatives busi- sales and trading for the region in 2003. BA degree in finance from the University ness until he was named to his current [email protected] of Hawaii. position in 2009. [email protected] JEFF FEIG CONRAD KWOK Managing director and Managing director and head WOLFGANG KOESTER global head of G10 FX of trading, and head of FX/ CEO Citi gold derivatives Fireapps DBS Hong Kong Jeff Feig is responsible for all foreign Conrad Kwok is managing director of trea- exchange sales and trading in the G10 sury and markets at DBS’s Hong Kong Wolfgang Koester, founder and CEO of developed markets at Citi. He joined the branch. He also heads FX/gold derivatives Fireapps, has managed risk for Fortune 100 bank in 1989 as an associate on the FX and was appointed head of trading in March companies and G10 governments since desk in Toronto and has held several FX 2011. Kwok joined DBS in 2000 and has 1986. Fireapps offers on-demand software management positions in North America been the driving force behind the FX deriva- and services to help treasurers and control- and Europe. He was named to his current tives business for DBS in Singapore and lers collect accurate FX exposure data and position in 2004. Feig is the current chair Hong Kong. better manage currency risks. Prior to form- of the Federal Reserve Bank of New York’s Prior to joining DBS, Kwok spent 11 years ing Fireapps, Koester worked for more than FX Committee and also serves on the Bank at Chase Manhattan Bank in Singapore 13 years at GFTA Trendanalysen, a quantita- of Canada’s FX Committee. He was on the and Tokyo. A Hong Kong native, he holds tive currency manager. He was president of board of electronic EBS until its sale a BA degree in finance and commer- GFTA from 1995 to 2000, and continues to in 2007 to ICAP. cial studies from Canada’s University of serve on the company’s board. [email protected] Western Ontario. [email protected]

12

Foreign Exchange 2011

DAVID GILMORE FREDERIC BOILLEREAU TODD CROSLAND Partner and economist Global head of foreign exchange and Chairman and president Foreign Exchange metals Interbank FX Analytics HSBC

David Gilmore is responsible for managing Frederic Boillereau was named global head Todd Crosland is chairman and president Foreign Exchange Analytics’ fundamental of foreign exchange and metals in March of the Interbank FX group of companies, coverage. Prior to founding the Essex, 2009, when HSBC integrated foreign including Interbank FX and IBFX Australia. Connecticut–based firm in 1994, he spent exchange spot, forward and options trad- Crosland founded Interbank FX in Salt seven years providing online commen- ing, as well as the metals business, into a Lake City, Utah, in 2001—offering indi- tary in New York and London with MCM single global product offering. Boillereau vidual traders, money managers and insti- CurrencyWatch and MMS International. joined the bank’s global markets division in tutional customers proprietary technology, [email protected] 1998. Since May 2008, he has been head- tools and education to trade spot foreign ing HSBC’s metals business. currency online. PHIL WEISBERG With customers in more than 140 coun- CEO MARK JOHNSON tries, Interbank FX has distinguished itself FXall Managing director, global head of foreign among industry leaders with its unique exchange cash trading HSBC nine-bank liquidity feed. In addition, Phil Weisberg has led FXall since its forma- Interbank FX’s pioneering trade execu- tion in 2000 and remains instrumental at all Mark Johnson is global head of foreign tion rates support the rising algorithmic, levels—from building and testing the latest exchange cash trading at HSBC, based in high-frequency-trading trend. technology improvements to working with London. He was founding managing part- [email protected] customers one-on-one. FXall is the lead- ner and chief investment officer at Johnson ing foreign exchange trading platform and Stewart Partners. Previously, he was a man- THANOS PAPASAVVAS strategic execution partner, serving more aging director at Deutsche Bank. Head of currency management and portfolio manager than 1,000 institutional clients, including Investec Asset Management corporates, asset managers, active trad- JOHN NIXON ers and banks. Executive director and CEO, Thanos Papasavvas is head of cur- ICAP Electronic Broking ICAP North America rency management at Investec Asset DREW NIV Management, which manages approxi- CEO John Nixon was named an executive direc- mately $9.8 billion of currency assets for FXCM tor of ICAP North America in May 2008. global investors. Previously, Papasavvas ICAP became the leading broker in the was a director and head of cur- Drew Niv, CEO of FXCM, co-founded the spot FX market with its purchase of the rency management for Credit Suisse foreign exchange brokerage in 1999. Since EBS platform in 2006. Nixon is also CEO of Asset Management. then, FXCM has become one of the larg- ICAP Electronic Broking and is responsible He joined CSFB’s fixed-income est firms in online retail foreign exchange for strategic acquisitions as well as ICAP’s department in 1994 after two years as trading, with 150,000 accounts in over 200 information business. He is a member of the an economist for the UK Government countries. Prior to founding FXCM, Niv was FX Committee sponsored by the Federal Economics Service. director of marketing at MG Financial. Reserve Bank of New York. [email protected] [email protected] JOHN TAYLOR JOAQUIM PIRES Chairman, CEO and chief DAVID RUTTER Managing director and head investment officer Deputy CEO of ICAP Electronic Broking of foreign exchange FX Concepts ICAP Millennium bcp

John Taylor founded FX Concepts, a New David Rutter is deputy chief executive Joaquim Pires is head of foreign exchange York–based investment management com- of ICAP Electronic Broking. Prior to join- at Portugal-based Millennium bcp. He is pany for foreign exchange assets, including ing ICAP in 2003, he was a significant responsible for FX trading and sales, cov- currency overlays, in 1981. He specializes in shareholder in Prebon. Rutter served in ering a wide range of currencies and struc- the analysis of cyclicality of FX and interest various capacities at Prebon, beginning tured products. Pires joined the bank in rate markets. Taylor developed some of the in 1988. He was global chief executive of 1991 from Banco Português do Atlântico, first computer models to assist multinational Prebon Energy and managing director of where he started his career in financial corporations in managing foreign exchange the Americas for Prebon Yamane. markets in 1986. risk. [email protected] [email protected] [email protected]

13

Foreign Exchange 2011

MAMMEN VARKEY JOACHIM ALPEN conclusion of trading sessions in Asia, Assistant general manager, Head of trading and Europe and New York, to increase trans- investments and capital markets treasury group SEB parency in the market. National Bank of Kuwait Joachim Alpen is head of [email protected] Mammen Varkey is assisstant general trading and capital markets at Stockholm- manager and head of foreign exchange based SEB, a position he assumed on BARRY WAINSTEIN trading at the National Bank of Kuwait in Vice chairman, deputy head November 1, 2010. He was head of of global capital markets, Kuwait. He started his career at NBK and foreign exchange at SEB, which has FX global head of FX and has been chief dealer since 1989. trading desks in 16 countries. precious and base metals Scotia Capital He has more than 25 years of experi- He joined SEB a decade ago as an ence in the markets and is an active emerging markets trader and has held Barry Wainstein is vice chairman and trader of the major currencies and a mar- numerous positions, including head deputy head of global capital markets ket maker in all Gulf Cooperation Council of trading in New York for three years. at Scotia Capital and global head of (GCC) currencies. Previously, he worked at the Swedish both the foreign exchange and metals [email protected] Embassy in Moscow. (ScotiaMocatta) business lines. Wainstein Alpen has a master’s degree in is a member of the Canadian Foreign MICHAEL STUMM international relations from Johns Hopkins Exchange Committee and the European Chief executive officer and president University. Central Bank’s Foreign Exchange Contact Oanda [email protected] Group. He holds B.S. and MBA degrees from the University of Witwatersrand, Michael Stumm is the co-founder of web- Johannesburg. based exchange rate portal Oanda, which STINA EKBERG-NORRHEDE [email protected] was launched in 1995 and became one of Head of e-FX trading and distribution the first companies to offer fully automated SEB online currency trading. Stumm has a Ph.D. ANTHONY BISEGNA in computer science and is a computer- Stina Ekberg-Norrhede has been head of Senior managing director and global head of engineering professor at the University of e-FX trading and distribution at SEB since foreign exchange Toronto. January 2011. Prior to that, she was head State Street Global Markets He specializes in distributed and paral- of algo FX trading at SEB Merchant Bank. Anthony Bisegna is responsible for lel systems, Internet technology and Following SEB’s launch of services in off- managing the foreign exchange sales e-commerce. shore Chinese renminbi for cash manage- and trading business worldwide for State Stumm has also held positions at IBM, ment, trade finance and foreign exchange Street Global Markets, including spot Stanford University and ETH . in December 2010, SEB recently introduced transactions, forwards, emerging markets Co-founder of SOMA Networks, he has an enhanced service to facilitate electronic and FX options. Bisegna joined State published more than 100 journal articles trading of renminbi via the SEB Trading Street Bank in 1987 in the capital markets and holds five US patents. Station. group. Prior to that, he was with Chase [email protected] Manhattan Bank’s treasury operations EDWARD VOORHEES group in New York. ROBERT SINCHE Global head of foreign Managing director, global exchange He is a member of the Foreign Exchange Saxo Bank head of foreign exchange Committee of the Federal Reserve Bank strategy of New York and a board member of the RBS Securities Edward Voorhees is global head of for- global FX division of AFME (Association Robert Sinche is a managing director and- eign exchange at Saxo Bank, based in for Financial Markets in Europe). He holds global head of foreign exchange strategy Copenhagen. a CFA designation. at RBS Securities, based in Stamford, He joined Saxo Bank in 2007 as global Connecticut. head of options. Voorhees has worked for [email protected] He was chief strategist for Lily Pond Capital Commerzbank in London, and Deutsche Management in New York. Before that, Bank and Citi in Frankfurt, London and BORIS SOMOROVSKY he was head of strategy for global rates, New York. Head of trading department Tatra Banka currencies and commodities at Bank of Saxo Bank is a leading online trading and America. RBS Securities is a unit of Royal investment specialist. It has begun publish- Bank of Scotland. ing from the over-the-counter Boris Somorovsky joined Slovakia-based [email protected] FX options market three times daily, at the Tatra Banka in 1999 as a foreign exchange

14

Foreign Exchange 2011

trader. He was named a senior trader in Suisse. He holds an MBA from Harvard PETER CONNOLLY 2004 and became head of the trading Business School. Executive vice president and group head of global department last year. The bank is a mem- transaction banking ber of Austria-based Raiffeisen International. [email protected] TONY WHITE Peter Connolly is an executive vice president Managing director, banking at Wells Fargo and group head of global Wall Street Systems transaction banking, which includes foreign MARK GALANT exchange, trade finance, cross-border trea- CEO and chairman sury management services, cross-border Tydall Trading Tony White is managing director of bank- e-commerce and cross-border investments. ing at Wall Street Systems, with additional He joined Wells Fargo in 1986 as the chief responsibilities for marketing and product corporate adviser for trading and sales. Mark Galant is CEO and chairman of Tydall management for Wallstreet FX, an inte- Three years later he became the division Trading, an ultra-high-frequency algorithmic grated platform to support high-volume manager for foreign exchange trading and trading firm. He is also a founding partner trade processing. WSS is now being sales. Connolly took on additional respon- of Faros Trading. Galant founded GAIN acquired by Ion Trading. sibilities in 1995, overseeing global trans- Capital in 1999, and the firm is now one of White was instrumental in the action banking. He is chairman of Wells the largest online foreign exchange compa- creation of Wallstreet ESN, an elec- Fargo Bank International. Prior to joining nies. GAIN Capital operates the Forex.com tronic settlement network for the capital Wells Fargo, Connolly was a chief corpo- system, which has clients in 140 countries. markets. rate dealer for Barclays Bank. He is a mem- Before that, Galant helped build FNX Wallstreet estimates that more than ber of the BAFT/IFSA Transaction Banking into a leading provider of trading and 25% of the world’s daily FX transac- Global Leaders. He is also a member of the risk-management systems. He tions flow through systems it provides Federal Reserve Bank of New York’s Foreign was also global head of foreign to banks. Exchange Committee. exchange options trading at Credit [email protected] [email protected]

1/2 PAGE HOUSE AD

16