Bank of England Governor Mark Carney Duggested

Bank of England Governor Mark Carney suggested that a virtual currency, modeled after Facebook's Libra, could someday replace the dollar as king of the foreign exchange market. Senior Vice President BoE recently aired an ambiguous proposal for the so-called "synthetic hegemonic currency" at the Jackson Hole Symposium of a central banker. Here's a brief assessment of why the Green Bag is losing its luster and the prospect of Carney's new digital currency to be supported by major central banks around the world.

Why dollar advantage

The dollar was the world's standard currency since various major units were fixed to the value of the greenback after the Bretton Woods contract in 1944. Thanks to the economic and political influence of the United States, we have maintained a global advantage ever since. Philippe Waechter, director of research at Ostrum Asset Management, said, “The main currency is always the largest currency of political power in the world. According to the International Monetary Fund, the dollar accounted for almost 62% of global foreign exchange reserves in the first quarter of 2019.

Europe's single currency ranked second with 20.2%, while Chinese yuan rose to 2nd largest economy ranking in the world, following the United States, but only 2%. Why is the green bag losing appeal? The dollar lost its sparkle due to globalization and changes in the global economic order, but the rotation of the US unit still affects other economies.

In a recent meeting with bankers in Wyoming, Carney said, “US development has had a significant impact on trade performance and the state's financial situation, even with limited direct exposure to the US economy. When the Greenback is grateful, the debt tends to be expressed in dollars, so so is the repayment for many emerging countries. The BoE governor, who resigned in January, added, "We need to change the game in the long run.

Central bank role

According to Carney, the public sector in the form of a central bank can provide the best support for the new virtual currency. Open questions about whether such a new (cryptocurrency) can be best served in the public sector, perhaps through a central bank digital currency network," he said. But both central bankers and world leaders are concerned about the current virtual currency crop because they are not regulated. President Donald Trump accused Bitcoin and Libra of "light air based" and, unlike the dollar, not dressed or credible.

Commentators believe Washington will not lose its status as the world's best reserve currency. Rabobank analysts said, “The United States will simply not let it happen without a fight. How about Libra? Meanwhile, the governor of BoE explicitly mentioned Libra, the future cryptocurrency released by social media giant Facebook in June. Carney is the world's most popular digital unit, but avoided mentioning Bitcoin, which suffers from volatility.

Launched in the first half of 2020, Libra supports a basket of currency assets to avoid sudden fluctuations in bitcoin and other cryptocurrencies. But Libra attracted the attention of the central banker due to the origin of the private sector. Agnes Benassy-Quere, a researcher at the Paris School of Economics, said, “The central bank is a bit annoyed at this (facebook) bid to privatize money. Bitcoin is decentralized, but Libra is co-managed by 100 partner companies, including Facebook itself.

Yields improved after policy rate

Yields improved after policy rates continued to rise, resulting in appreciation of green back deposits for domestic investors, while rupee deposits monetary funds for banks reached 69 billion rupees this year. Bankers have said that the rupee deposit is attractive compared to the dollar because the two currencies have a substantial profit difference. The State Bank of Pakistan is currently staying at 13.25%, raising interest rates for more than a year, making rupee deposits an attractive means. According to the Pakistan State Bank's latest data, between January and July, the rupee bank deposit increased by 69 billion rupees (13.747 trillion rupees).

Banks insisted that long-term deposits earn 10-11%, but that depends on the institutions where small banks offer more than big ones. Short-term deposits, on the other hand, yield about 8pc or more from rupee deposits. But unlike rupees, dollar deposits from local banks return about 1.5-2pc per year. According to the SBP data, commercial banks' dollar reserves increased by $ 566 million from January to July at $ 7.29 billion.

According to bankers, the exchange rate has been stable for more than a month, which has reduced appetite for the dollar among investors. Malik Bostan, the Pakistan Foreign Exchange Association, said, “There are no buyers in the open market, so every day banks sell 7-8 million dollars a day.” In the same period last year, about $ 750 million was sold to the bank for $ 325 million from May to July.

The bankers were happy with the increase in deposits, but they are also comfortable with investments in government newspapers that offer more than 14pc. The 12-month paper yield on the last auction of Treasury bonds was 14.24pc, and the last auction of Pakistani investment bonds (PIB) provided 14.22pc for three years.

The Federal Federal Board of Revenue on Monday

FBR confirmed the sales tax refund of 2.22 billion to exporters through the newly installed Fully Automated Sales Tax e-Refund (FASTER) system. According to the FBR, the first payment was made through the FASTER module for the July claim of reimbursement, and Pakistan State Bank confirmed the credit of the refund amount in the applicant's bank account, FBR said. Treasury Prime Minister Dr. Hafeez Shaikh shared his decision on the Twitter account that the government made an important decision regarding tax refund “to promote the country's economic activity and provide liquidity support to businesses.

Shaikh wrote that the government would immediately publish 22 billion rupees in sales tax refunds, along with all income tax refunds (up to Rs100, 000). He said that the verification process for other outstanding refunds will be expedited. Meanwhile, income tax refunds between Rs10,000 and Rs500,000 will be paid next month. The budgetary government has announced that it will pay taxpayers a refund quickly.

According to the official statement of the FBR, it is emphasized that by August 30, only nine refund claims in five export-oriented sectors were received and payments were made for claims settled by the FASTER module's risk management system. According to the press release, the number of refund claims received is not large. The FBR added that it encourages exporters to process and pay claims by submitting invoices in Annex-H format as soon as possible.

As a result of the withdrawal of SRO 1125 (I) / 2011, the inputs from the five export-oriented sectors could be rated as zero, so FBR contracted with exporters in the textile, leather, carpet, sporting goods and surgical supplies sectors. -You must pay your refund within 72 hours after you file a refund claim.

The FBR said in advance that an Annex-H submission, a form of monthly sales tax return, will be treated as a refund claim submission. To this end, the tax agency has developed a new IT module called FASTER, which is currently in operation. Since July, we will handle claims from 5 sector exporters in 5 sectors.

After the biggest month in August

The market opened on Monday and the bulls were in full control. The KSE-100 index climbed to 506 points tomorrow's high, but later reversed some gains, which rose 385 points (1.3%) from 30,057. Due to technical 'defects', the start of trading was delayed by 35 minutes, compensated by providing 15 minutes of additional time according to the rules Purchasing was found throughout, mainly in the exploration and production, banking, cement and steel sectors. The main reason for the index's rise is that a number of measures approved by the Pakistan Securities and Exchange Commission over the weekend helped investors take a positive view of stocks.

In addition, expectations for a drop in inflation have rekindled expectations for a cut in state bank policy rates. Last week, reports of the sale of oil and gas development companies and Pakistani oil threatened investors' sentiment. E & P was a leader with high share prices for both OGDC and PPL. It is noteworthy, however, that institutional investors, foreigners and mutual funds did not show much enthusiasm, but their purchases were limited to "individuals" who took new positions in $ 1.6 million worth of shares.

The volume traded at 77.4m, down 29.6pc Friday's Friday, and its value dropped to 16.5m, down 34.7pc. Shares that contributed significantly to Worldcall Telecom, Maple Leaf Cement, OGDC, K-Electric and TRG Pakistan formed a total of 39pc. By sector, investors' attention was witnessed in bank stocks where Habib, United, National and Alfalah were the main winners.

Cement strengthened with higher prices for Pioneer, Maple Leaf, Page, and DG Khan. The scripts that helped to boost the index the most were PPL, 3.7pc, Bank Al Habib 3.2pc, Fauji Fertilizer 1.9pc, United Bank 1.9pc, and Habib Bank 1.3pc.
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