By Dan Bell
Ratings agency Fitch has this morning downgraded New Zealand’s credit rating to AA from AA+. Fitch has cited slow growth and high external debt as fuelling its decision. NZDUSD is sharply lower in response, currently sitting at 0.7660.
The Eurozone debt crisis was in full focus overnight, as the German lower house of parliament ratified to plan to expand the European Financial Stability Facility. After heading higher initially on the news, EURUSD fell from its highs to levels seen prior to the vote. Tonight sees Germany’s upper house of parliament and also Austria conduct the same vote.
US stocks are currently rallying into the close (Dow +1.3%, S&P500 +0.4%), buoyed by better US GDP for Q2 and a 5 month low in Weekly Jobless Claims.
Building Consents for New Zealand are released at 1045 this morning.
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Dan Bell is the senior currency strategist at HiFX in Auckland. You can contact him here
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Headline
Just numbers – exploding in our faces!
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Five Banks Account For 96% Of The $250 Trillion In Outstanding US Derivative Exposure; Is Morgan Stanley Sitting On An FX Derivative Time Bomb?
Specifically, of the $250 trillion in gross notional amount of derivative contracts outstanding (consisting of Interest Rate, FX, Equity Contracts, Commodity and CDS) among the Top 25 commercial banks (a number that swells to $333 trillion when looking at the Top 25 Bank Holding Companies), a mere 5 banks (and really 4) account for 95.9% of all derivative exposure (HSBC replaced Wells as the Top 5th bank, which at $3.9 trillion in derivative exposure is a distant place from #4 Goldman with $47.7 trillion). The top 4 banks: JPM with $78.1 trillion in exposure, Citi with $56 trillion, Bank of America with $53 trillion and Goldman with $48 trillion, account for 94.4% of total exposure. As historically has been the case, the bulk of consolidated exposure is in Interest Rate swaps ($204.6 trillion), followed by FX ($26.5TR), CDS ($15.2 trillion), and Equity and Commodity with $1.6 and $1.4 trillion, respectively.
http://www.zerohedge.com/news/five-banks-account-96-250-trillion-outsta…
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