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Mapping The Next Nation To Join The Currency War
With China devaluation looming as the great unspoken Black Swan trade, and on the heels of the Swiss National Bank folding on its 'peg', we thought a quick glance at the world's "pegged" currencies would be useful as a guide to where the next shoe (and pant legs) will drop. With global FX implied volatility at EU crisis highs, the markets clearly expect more to come...
The World's Pegged Currencies...
Pegging a nation’s currency to that of a trading partner has some advantages. It allows businesses to plan; exporters and importers can agree on prices without worrying about sudden foreign-exchange fluctuations. Until the early 1970s, most global currencies were pegged to the dollar under the Bretton Woods system. Since then, pegs have been adopted for three main reasons by varying groups of countries.
- The first group, of which China is an example, dislikes the fluctuations of the free market. These countries prefer to manage their currencies, along with maintaining the capital controls that a peg implies.
- A second group sees currency pegs as a way to gain economic credibility: Argentina’s currency board in the 1990s was designed to help end the hyperinflation of the 1970s and 1980s. In effect, America’s Federal Reserve, not the Argentine central bank, set monetary policy.
- The third group is the euro-zone countries, which saw currency links through the Exchange Rate Mechanism (ERM) as a way to boost economic integration, a process that ended with the creation of the euro in 1999.
Yet pegs have problems. Economic policy must be subordinated to the exchange-rate target. If monetary policy in the target country is tightened, then the pegger must tighten too. If the two economies are not closely linked, such a policy shift may be completely inappropriate. And markets can sense weakness. Traders may try to break the peg, as happened when Britain was forced out of the ERM in 1992. The central bank may run out of reserves in an attempt to hold the peg, and the policy will have to be abandoned.
And judging by FX implied volatility, markets expect more pain to come...
Charts: Bloomberg & The Economist
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This Article is way over the head of most here. Obama is Gay.
True it is way to lengthy for most to wade through no less comprehend.
I laughed when I saw venezuela on there. Do they mean the peg or the true rate of exchange? I think those differe by a factor of 20.
The Economist.
'Nuff said
BTW, am I supposed to know where Venezwhaleia is on a map or not?
Imatard
Don't matter - they'll drop us in - don't matter on no geography
Based on your prior comments, I wonder how many will figure out that you're being facetious, and how many will have to look up the word 'facetious'.
It's called SATIRE!!!! Get it?
Was it over when the Germans bombed Pearl Harbor?
You idiot... that was the Chinese and Russians or something
They told my grand nephew in the CA primary school system today that it was the homophobic Norks.
The Norks can't be homophobic because they are good old fashioned progressives....
Ok - I know this one. The Germans won some war and now control the EU and are having trouble getting their war debts paid. Yep - will Kit up and fight for that right. Damn dead beats.
You both are so naive its was a mossad flase flag attack.
But Obama IS gay.
FFS - first the graphs and now the fancy words. You're losing me.
facetious: 1) many faceted, brilliant
from: Botzelheim Encylcopedia, 2007, Dewey, Fleecum and Pewblish, GB, publisher.
Only the colorblind stupid should have trouble understanding this.
Pegged is the new Shagged, baby Yeah!
Article make some observations and zero assertions or predictions.
Fail.
'The Data Team' can go fuck themselves.
For accurate predictions, read the comments here and bet against them.
I predict that you will be successful and well-liked.
Ya were never sharp enough to be funny, kid. That's why mommie paid for dance lessons.
Ouch. Quit hogging the wit handsome, you're making us feel inadequate.
I apologize :) . What do peeps that feel inadequate need? Moar self esteeem classes!! Mommie was right again.
Sometimes you post intelligently but then other times you are an utter douche. Bipolar or something else?
It's my twisted sense of humor. Get it? maybe not. I have moar fun playing with peoples heads than anything.
Predictions are hard to make...especially about the future.
Finally - I'm in early. So, if you understood that graph, please keep my info because I'm thinking maybe my skills are different from yours - tks
P.S. for the down vote - sorry - should have been more explicit - I'm not looking for your 'skills' but tks anyway
Iran?
I sure hope I can peg something tonight!
LoL!! That's why you should never marry a girl named Peggy. Get it?
Square peg in a round hole !
I was fascinated by the color codes (pegging) of the three countries north of Iran, Israel and Belorussia. Not what one would expect.
Of course, given Ukraine's color peg, I'd argue that this map is out of date.
Ummm Ok what ever floats your boat!!!
http://www.urbandictionary.com/define.php?term=pegging
OK
I bit and looked at it.
Why, pray tell, would you know what that is, hmmmm?
Not that I've never referenced anything like that before. But this one and somebody else's fleshlight are ... well, I lead a sheltered life.
What can I say. Ocassionally Zh doesnt hold my interest and after staring at half of thease avatars I stick my terminal where it doesnt belong. After all there are Tubes Galore.
Ahem, how did you know that? No, actually, don't answer that.
I probably could have done without knowing what all the guffaws were about. Apparently "pegging" doesn't mean the same thing to everybody? It didn't seem much related to economics... Unless, of course, you're paying for it? Dunno...
HK
China
Iraq
I like the part of the article that says "everything is awesome." BTFD accordingly?
Used my find button and couldn't find that quote you quoted. Link please.
Right here => "everything is awesome."
In the forkink graph. Did you look at the graph?
Oh my yes. Next currency crisis JUST BTFD!
BTW - If you look at the dip right before everything is awesome, we now know why oil prices started falling. BINGO. I am so proud.
Sorry bro, I just come here for the chart-porn. I assume everyone looks at the charts.
If my wife asks, I "only read it for the articles."
http://export.gov/static/TradeFinanceGuide_Ch03_Latest_eg_main_055033.pdf
http://www.discoverhongkong.com/eng/plan-your-trip/practicalities/good-t...
Ignoring a black swan event, the eastern Slavic nations will the next to bail, as they can cozy up to Putin as a shield against the Zionist west, and their banksters. Croatia? Bulgaria? Romania?
The banksters need to repay us.
I relly wish I had the balls and deep pockets to trade FX. RICHHHHHHHHH - just like scum bag Soros.
I'm not long the leu and the hryvnia.
You'd have to be a completely insane risk taker to play in those currencies. You might as well fuck a prostitute that has herpes, hep C, and warts without a condom, and take your chances.
Sadly I have a small business act in the Ukraine where the hryvnia has declined in value notably. But I need it to do business there.
I save in reminbi and live in the USA......I hope the Chinese DO drop the peg!
The reminbi:USD will go from 6.25:1 to parity and my short on the SNP will start paying.
Congrats to all the regular and not so regular contributors to ZH comments. Like the articles but can't get enough of the fun comments. Thanks y'all keep it coming!
Iran is misrepresented. It is pegged to the USD. Anyways the article states that "pegs have been adopted for three main reasons by varying groups of countries..."
Let's clear this up. Pegs are adopted because if they don't they get fucking murdered by Rothschilds operatives. Understand? A currency peg is one and only one thing: a mechanism to export inflation. If the USD money supply is increased, then so is China's. That's a really big pool of real assets to steal from!
So those expecting the USD to hyperinflate like Zimbabwe or Belarus or Weimar Germany or whatever need to understand: blowing up the USD is the same as blowing up half the world's ecomomies. It's a lot easier to overdo it with your money supply when it doesn't have that valve.
The other half of the world (or so) is the EUR. So Rothschild has BOTH Pepsi and Coke. Both USD and EUR. It looks like the EUR will die first, but they don't really care that much. Either way is fine.
Understand?
So the Fed screwed up then...issued trillions in dollar denominated...created zippo for inflation but a HUGE equity bubble and then having announced the theory of "forward guidance" tried it out by changing its mind/losing its mind causing entire nations to get sucked into a "dollar vortex"!
Yee-haw! Who wouldn't be long everything here!
De-peg