Currency Chaos – "Buy Dollar and Sell Local Currency Club" Growing Rapidly

The Dollar has been declining at a fast clip over the last month or so over concerns that the US Fed will unveil a  second round of Quantitative Easing with figures of $1 Trillion being quoted.This has led to sharp appreciation of currencies around the world with some like the Malaysian Ringitt touching an all time high.Japan which depends on its exporters for propping up its debt laden,deflating economy has intervened in the currency markets after a 6 year hiatus.The Japanese sold around $20 billion in the open market to devalue the yen after it touched a 13 year high.The Japanese companies like Hitachi and others were literally crying for devaluation as they are still doing now.The Intervention has led to increased fears of bad blood between countries each of which is trying to export its way out of trouble.Japan and China relations are becoming frosty with Chinese buying of JGBs.The US has remained silent of the Japanese move with the domestic politicians concentrating on bashing the Chinese over their currency peg.Germany is enjoying a golden year with Euro depreciating sharply against other currencies due to the Greek Contagion.However that seems short lived as the Dollar starts depreciating again.

Emerging Countries rapidly joing the Intervention Club

Brazil,Peru,Colombia and now South Korea have all joined the “Buy Dollar and Sell Local Currency” Club.The Brazilian Real has appreciated by 34% in the last 2 years while similar stories lie behind Peru and Colombian interventions as well.With yields at near zero,Developed World Investors are pouring money into debt,equity and commodities fueling  some of the Emerging Markets to all time highs.Some of the valuations like the Indian market are already stretched with local investors shunning the bubble markets.Countries with large Export Sectors like South Korea are particularly sensitive to currency appreciation and are joining in the chaos that the currency markets have become.The $4 Trillion Currency Markets are too big for a single country to take on as the Swiss found out losing Billions of Dollars in the process.The Currency Chaos is set to persist as the Financial System has become Unstable with Huge Debts,Moral Hazard and Central Bank Meddling.Gold has touched an all time high of $1300 with Silver following closely.With such volatility in Currencies,Business has become quite difficult with faith in currencies eroding at a fast pace.

Real Falls as Sovereign Wealth Fund Approved to Buy Dollars – Businessweek

Brazil’s real fell for a second day after the government authorized its sovereign wealth fund to start purchasing foreign currencies such as the dollar.Brazil’s sovereign wealth fund has “no limit” on investing in such currencies, the Treasury said in an e-mailed statement. Finance Minister Guido Mantega last week vowed to take measures to prevent the real from strengthening further after the currency rose 33.6 percent since the beginning of 2009.

Peru’s Central Bank Intervenes In Foreign Exchange Market, Buys $121 Mln – WSJ

The Central Reserve Bank of Peru intervened in the foreign-exchange market Thursday to buy $121 million at an average of PEN2.7889 per U.S. dollar.The central bank has been purchasing dollars regularly since June 18, intervening to smooth out volatility in the exchange market. Peru’s sol has been on an appreciating trend recently due in part to strong inflows of capital. On Wednesday the central bank bought $241 million and on Tuesday it bought $20 million.

Colombia Central Bank To Restart Buying Dollars – WSJ

The Colombian central bank restarted buying U.S. dollars in the currency market Wednesday, a move designed to halt the ascent of the peso, which threatens to undermine some key sectors of the economy.he announcement had been widely expected as the peso has been on a tear and traded earlier this week at its strongest level in two years. Pressure on the monetary authority grew after the peso breached the COP1,800 mark last week.

The peso has strengthened 13% against the dollar so far this year and ranks as one of the top-performing currencies in the world. Authorities have blamed the weakness of the dollar in international markets and a massive influx of foreign direct investment into Colombia, which this year is expected to reach $10 billion, for the peso’s surge.

Bank of Korea reportedly intervenes to curb won – Marketwatch

South Korean authorities bought dollars Monday to curb the won’s rise to a four-month highs, according to reports citing foreign-exchange traders.

The U.S. dollar was buying 1,148.2 won, after falling as low as 1,146.0 won earlier, its lowest since mid-May. The central bank was said to have entered the market around the 1,148.0 won level, and may have bought between 500 million and $700 million.