Stage 7 Expanded Reading
In this stage you are expected to broaden your horizon into the topic of the lecture.Please read the following article carefully.
Challenge from Seven Emerging Currencies
In the turbulent world of foreign exchange,the seven most heavily traded currencies occupy a fairly rigid hierarchical order.In recent years,a number of second-tier currencies have seen a huge increase in their share of global forex turnover,posing a challenge to the established hierarchy.While some of these seven currencies may be obvious,others are less so.
According to the Bank for International Settlements survey conducted in April 2013,global forex market activity was a staggering $5.3 trillion per day in that month,an increase of 33% from daily turnover of $4 trillion in 2010.
The survey showed that the U.S.dollar continued to be numero uno by a very wide margin,contrary to occasional speculation about the greenback’s eventual demise.The U.S.dollar accounted for an 87.0% share of average daily forex turnover in April 2013.(Note that since two currencies are involved in each forex transaction,the sum of the percentage shares of individual currencies will total 200% rather than 100%.)The next three positions were occupied by the euro(33.4% share),Japanese yen(23.0%)and British pound(11.8%).These top-four currencies have had the same ranks in the global currency hierarchy in this millennium,although their relative turnover share has fluctuated to a limited extent over the years.The rest of the positions were taken by the Australian dollar,Swiss franc and Canadian dollar.
Four of the seven leading second-tier currencies are easy to identify,belonging as they do to the biggest emerging economies or BRIC—the Brazilian real,Russian ruble,Indian rupee and Chinese renminbi(or yuan).The other three currencies are less obvious—the Mexican peso,Turkish lira and South African rand.The collective share of average daily forex turnover of these seven currencies has increased from 6.2% in 2010 to 10.8% in 2013(as mentioned earlier,the sum of individual currency shares totals 200%).
There has been a phenomenal increase in daily turnover for some of these currencies,with the biggest trading surges recorded by the Mexican peso,Chinese renminbi and Russian ruble.Turnover in the Mexican peso increased 171% from 2010 to $135 billion in 2013,giving the currency a 2.5% share of global forex trading and making it No.8 among the most actively traded currencies.However,the biggest increase in forex trading was recorded by the Chinese renminbi,as daily turnover soared 250% since 2010 to $120 billion in 2013,giving it the No.9 position among the most-active currencies.The Russian ruble also had a 140% increase in daily forex turnover to $85 billion,enabling it to climb four spots from 2010 to the No.12 rank in 2013.
The increased share of forex turnover by these emerging currencies has come at the expense of major currencies such as the euro,Swiss franc and Canadian dollar.With the international role of the euro having contracted since the continent’s sovereign debt crisis erupted in 2010,euro forex turnover increased only 15% from 2010 to about $1.8 trillion per day.Although the euro remains the second most traded currency worldwide,its share of global forex turnover declined by almost 6 percentage points to 33.4% in 2013.
Leveraged carry trades may partly explain the exponential increase in EME currency trading,but they are far from the only reason.Most of these seven currencies offer high interest rates,making them favored targets for carry traders.For example,as of May 22,2014,the yield on 10-year government bonds in some of these nations was as follows—Brazil,11.18%; India,8.71%; and South Africa,8.04%.Contrast those yields with the 2.55% yield on the U.S.10-year Treasury,and it’s easy to see why those interest differentials may be so alluring to savvy traders.
But the high interest rates offered by many EME currencies are there for a reason—rampant inflation.A number of these emerging economies are also beset by structural issues such as growing current-account and budget deficits.In fact,these weak economic fundamentals led Morgan Stanley last year to identify a group of emerging economies as the“Fragile Five”—Brazil,Indonesia,India,South Africa and Turkey.These five economies have—on average—a budget deficit of 4.0%,current-account deficit of 4.1% and inflation of 7.5%.Concerns that tighter U.S.monetary policy would make it difficult for these nations to attract foreign capital to fund their deficits led to sharp declines in their currencies and stock markets from the summer of 2013 to early 2014.
Based on BIS data and findings,three main drivers may account for rapid growth in forex turnover of the emerging-market economies.To begin with,forex growth in the EMEs has been led by very strong demand for over-the-counter(OTC)derivatives such as currency forwards,swaps and options.OTC derivatives turnover rose by 41% over the 2010-13 period,from $380 billion to $535 billion,compared with an increase of 17% in spot-forex turnover.This supports the view that hedging demand and speculation by foreign portfolio investors is a primary driver of higher forex turnover.
In addition,offshore trading—or trading of a currency outside the jurisdiction where it is issued— is a gauge of a currency’s“internationalization.”The offshore component has had the most rapid growth in EME currencies,especially for the Asian currencies such as the renminbi and rupee,with offshore trading contributing as much as 35 percentage points to growth of 41% in the 2010-13 period.The Chinese renminbi is playing an increasingly important role within Asia in this regard,with offshore turnover of $86 billion daily,which amounts to 72% of its global trading volume.
Furthermore,the increase in global forex turnover has been magnitudes higher than underlying growth in the global economy or worldwide trade for decades.Growth in EME forex turnover is no exception to this trend,implying that“financialization”of these currencies will continue.That said,part of the forex volume growth can be attributed to higher portfolio flows,with BIS analysis suggesting a positive and statistically highly significant relationship between portfolio inflows and outflows in emerging markets and forex turnover in the respective currencies.For instance,a 10% increase in cross-border fund flows is associated with a 7% increase in global forex turnover for Asian currencies,and a 10% increase for Latin American currencies.
(Source:adapted from“Seven Emerging Currencies Challenging the Forex Hierarchy”on www.invespedia.com)
Task 1:Reading Comprehension Questions
The following questions are asked based on the above article.Please go back to the article and find the answers.
1.Which currencies are among the top forex hierarchy?
2.Which currencies are among the second-tier of the forex hierarchy?
3.How large is the combined average daily forex turnover of the top-four currencies in 2013?
4.How did the Mexican peso,the Chinese yuan and the Russian ruble perform respectively in 2013?
5.In what ways did the emerging currencies create an impact on the global forex trading?
6.What is a leveraged carry trade?
7.What problems are plaguing many emerging economies?
8.What has caused a big increase in OTC derivatives trading?
9.What is meant by“a currency’s internationalization”?
10.What is meant by“a currency’s financialization”?
Task 2:Paraphrasing
Explain in English the underlined words and expressions in the context of the above article.
1.In the turbulent world of foreign exchange,the seven most heavily traded currencies occupy a fairly rigid hierarchical order.
2.The U.S.dollar continued to be numero uno by a very wide margin,contrary to occasional speculation about the greenback’s eventual demise.
3.There has been a phenomenal increase in daily turnover for some of these currencies,with the biggest trading surges recorded by the Mexican peso,Chinese renminbi and Russian ruble.
4.Leveraged carry trades may partly explain the exponential increase in EME currency trading,but they are far from the only reason.
5.A number of these emerging economies are also beset by structural issues such as growing current-account deficit and budget deficit.
6.Forex growth in the EMEs has been led by very strong demand for over-the-counter(OTC)derivatives such as currency forwards,swaps and options.
7.This supports the view that hedging demand and speculation by foreign portfolio investors is a primary driver of higher forex turnover.
8.Trading of a currency outside the jurisdiction where it is issued is a gauge of a currency’s“internationalization.”
9.The increase in global forex turnover has been magnitudes higher than underlying growth in the global economy or worldwide trade for decades.
10.BIS analysis suggests a positive and statistically highly significant relationship between portfolio inflows and outflows in emerging markets and forex turnover in the respective currencies.
Task 3:Translation
Read the article again and translate it into Chinese.
阅读文章参考译文：
七种新兴货币带来的挑战
在动荡不安的外汇交易市场上，交易最多的七种货币排列有序、等级森严。近年来，不少第二梯队的货币在全球外汇交易中所占份额一路飙升，给已有的货币秩序带来了挑战。在这七种新兴货币中，有些可能是众所周知的，有些则名不见经传。
据国际清算银行在2013年4月份的调查显示，该月全球外汇市场日均交易额达到了惊人的5.3万亿美元，比2010年同期的日均交易额4万亿美元增长了33%。
这份调查推翻了时有出现的“美元即将寿终正寝”的论调，显示美元仍以绝对优势占据霸主地位。在2013年4月份外汇日均交易额中，美元占87%（注释：由于每一笔外汇交易都涉及两种货币，因此每种货币的份额占比总和是200%而非100%）。紧随美元之后的是欧元（占33.4%），日元（占23.0%），英镑（占11.8%）。如此看来，这四大货币均进入本世纪全球货币排行榜的第一梯队之中，尽管多年来它们的前后顺序略有更迭。第一梯队的其他货币是澳大利亚元、瑞士法郎和加拿大元。
第二梯队的七种主要货币中有四种显而易见，即巴西里尔、俄罗斯卢布、印度卢比和中国的人民币，它们均为四大新兴经济体（即金砖四国）的货币。另外三种货币则不太起眼，分别是墨西哥比索、土耳其里拉和南非兰特。以上七种货币的日均交易总额从2010年的6.2%升至2013年的10.8%（如前所述，每种货币的份额占比总和是200%）。
第二梯队的货币中有一些货币的日均交易额呈暴涨趋势，其中最为显著的是比索、人民币和卢布。在2010年至2013年期间，墨西哥比索的日均交易额跃升171%达1 350亿美元，占全球外汇交易额的2.5%，成为排行第八的交易最活跃货币。然而，外汇交易增长最快的要数中国的人民币，在2010年至2013年期间，日均交易额暴涨了250%达1 200亿美元，成为排行第九的交易最活跃货币。同期增长的还有俄罗斯卢布，日均交易额达850亿美元，增幅为140%，在交易最活跃货币的排名中上升了四位，跃居第十二位。
上述新兴货币外汇交易额的增长，伴随着欧元、瑞郎和加元等主要货币交易额的下降。自2010年欧洲大陆爆发主权债务危机以来，欧元的国际地位持续走低，其日均交易额仅微长了15%，约为1.8万亿美元。虽然欧元仍稳坐全球第二大交易货币的交椅，但是，2013年欧元在全球外汇交易额的占比跌至33.4%，减少了大约6个百分点。
非抵补套利可能促使了新兴市场国家货币交易额的大幅攀升，但这绝非唯一的原因。由于这七种货币大多数挂牌的利率都很高，因此备受外汇套利的青睐。例如，截至 2014 年5月22日，部分国家的10年期政府债券收益率报收如下：巴西11.18%；印度8.71%；南非8.04%。相比之下，美国10年期公债的收益率为2.55%，如此大的利差自然会吸引外汇交易高手进场。
然而，许多新兴市场国家实行的高利率，是由肆虐的通货膨胀所致，其中有一些国家还同时备受结构性问题的困扰，比如日益扩大的经常项目逆差和财政预算赤字等。其实，摩根斯坦利在去年就根据这些脆弱的经济基本面，将一组新兴市场经济体认定为“脆弱五国”，它们分别是巴西、印度尼西亚、印度、南非和土耳其。这五国的平均财政预算赤字为4%，经常项目逆差为4.1%，通胀水平为7.5%。由于担心美国采用紧缩的货币政策，可能导致这些国家难以吸引外资去弥补赤字，因此，从2013年夏到2014年初，上述国家的货币大幅贬值，股市暴跌。
根据国际清算银行的数据和研究结果，推动新兴市场国家的外汇交易额的飞速增长，可能来自以下三大动力：第一，外汇衍生品如远期、掉期和期权是场外交易品种，因此对这些衍生品的大量需求，带来了新兴市场国家外汇交易的增长。在2010年至2013年期间，衍生品场外交易额从3 800亿美元猛增至5 350亿美元，增幅为41%，而即期外汇交易额同期的增幅仅为17%。这足以证明，套期保值的需求与外国投资组合的投机行为，是推动外汇交易高速增长的基本动力。
第二，离岸交易，即货币在其发行国管辖范围之外进行的交易，是衡量货币国际化的标准。新兴市场国家货币的离岸交易增长最快，特别是一些亚洲货币如人民币和卢比，在2010年至2013年期间，外汇交易量增长了41%，而离岸交易就贡献了35个百分点。人民币在亚洲发挥着日益重要的作用，离岸日均交易量为860亿美元，占其全球交易量的72%。
第三，数十年以来，全球外汇交易的增长，远远高于全球经济增长或世界贸易增长。新兴市场国家的外汇交易，在这一趋势之下也不例外，表明这些货币的“金融化”将持续下去。虽然如此，外汇交易量的增长，有一部分是由于国际证券投资的增量所致。国际清算银行的研究表明，在新兴市场国家的“国际证券投资流出入量”与“对应货币的外汇交易量”之间，呈现出统计上明显的正相关。例如，当跨境资金流动增长10%时，在全球外汇交易中的亚洲货币就会增长7%，而拉美国家的货币则会增长10%。