Sunday, September 25, 2016

New Regulations Force Popular Crypto-currency Exchange Poloniex to Close its Doors to New Hampshire Residents



Poloniex, a Delaware-based digital currency exchange and one of the most popular trading venues for alternative digital assets, will be closing its doors to residents of New Hampshire temporary basis, citing new virtual currency regulations in the state.

The exchange has informed all existing New Hampshire users to withdraw any remaining funds by October 6, 2016. As part of the suspension, existing New Hampshire clients have been blocked from trading and new registrations from the state have also been halted for the time being.

While Poloniex has been quick to implement the restrictions, the exchange explained that services in New Hampshire may resume at some point in the near future, pending the acquisition of certain licenses:
“Our legal team is working closely with the State of New Hampshire Banking Department and other regulatory agencies to verify that changes in their statutes apply to the services offered by Poloniex and to seek licenses where necessary.”
According to new crypto-currency statutes passed at the beginning of this year, anyone who facilitates the exchange between a virtual currency and fiat currency is classified as a money transmitter, which requires a license and a $100,000 bond, in addition to several other fees. The new rules do not apply to digital currency users, who use digital assets for purchasing goods and services.

New Hampshire regulators claim the new rules are designed to offer additional protections to the general public, however, critics say digital currency startups will be at a disadvantage due to higher startup costs. Additionally, the new rules are very vague when it comes to classifying digital currency miners.

Virtual currency legislation and the industry as a whole is still in the nascent stages, and these sort of disruption are to be expected, states Poloniex:
“This is a nascent industry; as the regulations around it mature, these types of service disruptions may not be entirely avoidable, but we have been and will continue to be proactive in educating regulators and monitoring both existing laws and upcoming changes to these laws so that we can limit interruptions wherever possible.”

Friday, September 23, 2016

Bloomberg Launches New Forex Trading & Reporting System in the Philippines

Bloomberg Terminal, Image credit: Ifloresc


Bloomberg has launched its new tri-party ticketing system, which now allows interbank foreign exchange dealers and clients in the Philippines to trade and report FX forwards automatically.

The Bankers Association of the Philippines (BAP) - which is made up of 28 financial institutions, Bangko Sentral ng Pilipinas (BSP) and four other interbank dealers - handpicked Bloomberg to oversee the new trading venue.



Under the previous system, FX transactions on the Philippine interbank market had to be manually confirmed and reported to the Bangko Sentral ng Pilipinas, a cumbersome process that impeded price discovery and transparency. Bloomberg’s tri-party ticketing system allows for real-time market data to be accessible by all market participants.

The new facility has received plenty of praise from industry leaders, “Instead of having to manually confirm each trade, I now have complete visibility of trades captured electronically with the necessary confirmations sent to counterparties and relevant trade reporting authorities, which significantly enhances our workflow,” said Marcel Ferreria, Director of FX Swaps at Tradition Financial Services.

Bloomberg’s tri-party system automates the trading process by sending confirmations to both parties of the trade, the dealer, and the BSP. Additionally, the new system feeds into Bloomberg Professional(the terminal).

Grant Coombe, Senior Manager of Global & Asia Pacific Key Accounts for Bloomberg, said:
“The tri-party ticketing system will be an integral tool for the FX community in the Philippines as it allows real-time reporting of trades to all counterparties in an efficient and transparent manner.”
According to figures released in the 2016 Triennial Survey, which is conducted every three years by the Bank for International Settlements, the Philippine peso has a 0.1 percent share of the daily global FX market, which has an average daily turnover of $5.1 trillion.

Wednesday, September 21, 2016

Wirex Allows its Bitcoin Debit Card Holders to Fund Accounts with Alternative Virtual Currencies (Ethereum, Monero, Litecoin, Dash)



Wirex bitcoin debit card holders will be able fund their cards with alternative currencies traded on Shapeshift.io, an automated digital currency exchange supporting 34 alternative coins, according to yesterday’s announcement.
“Wirex, a mainstream bitcoin debit card, has not only removed the need for a bank account, but their bitcoin debit card can not be funded with Ethereum, Monero, Dash, Litecoin and dozens of other major digital assets within just a few steps through their app.”
The London-based bitcoin debit card issuer made use of the Shapeshift programing application interface (API) to give its users the ability to top up their cards with multiple altcoins.

While bitcoin has gained much traction with online retailers and financial services companies, many of the alternative crypto-currencies have not had the same level of support. And Wirex Co-Founder Pavel Matveev explained that one of the most requested features from existing clients has always been support for alternative digital assets:
“One of the most popular customer requests was to make a multi-asset-friendly debit card and with ShapeShift integration we have finally made this possible.”
The altcoin funding option works by instantly converting incoming deposits to bitcoin in the Wirex mobile app - available on Android and iOS - so the funds on the debit card are still held in bitcoin.



The firm has released several important updates this month. Last week, Wirex upped its card limit per client to six, allowing users to own both a virtual and a physical card for each currency in their account. Previously, users had to choose between plastic and virtual cards due to the 3-card limit.

HolyTransaction is Not Closing Down, Rogue Employee Blamed for Email Snafu



Last week, an email communique from HolyTransaction - an online digital currency wallet provider, which supports multiple digital assets - instructed all clients to withdraw wallet balances by the end of the month as the service would be closing down.

But an official email sent to all HolyTransaction clients yesterday by CEO Francesco Simonetti claims that last week’s closure notice was sent by a disgruntled employee.

Simonetti’s email states:
“That message was the result of a disgruntled system administrator's reaction, but the situation is cleared now. We took action and there will be no further hiccups.”
As a result of the rogue email, the HolyTransaction team has decided to “to rebuild the entire infrastructure from scratch into new machines.” At press time, HolyTransaction services are still down and users are taken to a server maintenance page when attempting to login, which states:
“Our team continues to rebuild the infrastructure in new machines, we would like to assure that customers' funds are safe and about our total commitment to serve the community the best. We will be back online stronger than before. Keep tuned, many new features will be implemented soon.”


Saturday, September 17, 2016

Heating Up Your Living Room with Computational Science and Digital Currency Mining

Image credit: “FreeImages.com/José Gregorio Sánchez Duarte.”


Winter is coming to Northern Hemisphere and, soon enough, all sorts of heaters will start consuming a lot of electric energy. But what if you could get paid for electric energy you spend on producing heat? And even more important, why use all that electric energy just to turn some metal red-hot? What if it could be also used for some useful scientific computations and advancing biomedicine, mathematics and technology in turn? Sounds like science-fiction? It's possible today with Gridcoin - a digital currency which is securely rewarding BOINC computations on top of Proof-of-Stake.

GPU mining and the power/heat issues:

BOINC is an open-source software platform for computing using volunteered resources. There are many different BOINC projects, covering all fields of science. Many popular BOINC projects have both CPU and GPU applications, enabling you to contribute some serious computing power to the scientific projects of your choosing. However, that computing power comes at a price - modern graphic cards consume a lot of electric power, up to 300 watts when overclocked and running BOINC GPU applications (which are usually very demanding and thus power hungry). If you have four such graphic cards in your PC, that's 1200 watts just for your GPUs and all that power gets converted to heat eventually. It's impossible to dissipate so much heat just with air-cooling, but it's certainly possible with water.

Watercooling your BOINC/Gridcoin machine:

Watercooling enables you to build an extremely powerful PC, at acceptable noise-levels and aesthetically unobtrusive. Such machine can then be placed in your living-room, without making it look like a workshop:

Four graphic cards (AMD Radeon HD7970) with waterblocks and a bridge, ready for installation in PC case:



Four graphic cards, installed in PC case, with some tubing already connected:



Everything is fully connected here. Only the biggest cases will have enough room to comfortably fit so many components. This is Silverstone TJ07 which is medium-sized, so it's messy with so much stuff inside. However, with watercooling, airflow inside the case is of little importance - heat is carried away by water, flowing through the tubes and waterblocks. So you can just close the case and forget about cable-management :)


Fully assembled watercooled PC, with two 480mm radiators and a reservoir (blue cylinder) outside the case:
Another view of the whole desktop, placed inside the living room. Looks normal enough :)

Full specs of this machine: - CPU Intel Core i7-5930K Haswell-E - ASUS Rampage V Extreme X99 - Corsair Dominator Platinum 16GB DDR4 3000MHz 4x4GB Kit - 4 x AMD Radeon HD7970 Power consumption is at 1150 watts altogether, even when GPUs aren't overclocked. I measure the power consumption through two APC UPS, which provide backup power for my desktop PC:
Pulling 1154 watts from the wall, under moderate BOINC load With water, it's possible to cool any PC you can possibly build with today's technology. Here is a short Youtube video of four HD7990 graphic cards, cooled by nine 360mm radiators (not mine unfortunately):

Gridcoin mining and earnings:

I am currently running Milkyway@home BOINC project on my desktop. Milkway@home is creating a highly accurate three-dimensional model of the Milky Way galaxy and is particularly well-suited for HD7970 GPUs, which have very high FP64 (double-precision) performance, which is in turn required for computations performed by Milkway@home. With such a setup, it's possible to earn about 250 Gridcoins (GRC) per day. At present prices, that's worth about 2 USD. Unless you have some really cheap electric energy in your area, that's not nearly enough to cover your electric bill.

But, with 1200 watts of heat getting dumped in your living room all the time, there is very little need for any extra-heating during the winter (I live in Mediterranean Europe, so winters are generally mild here). Of course, there are many crypto-coins out there which use Proof-of-Work and which can also use your GPUs for mining. But only Gridcoin can reward actually widely useful scientific computations performed by BOINC. So, in fact, I am using computational science to heat up my living room, and if you ask me, that's way more cutting edge than running repetitive Bitcoin miners.

Recognition for your contribution to science:

Some other BOINC projects, like Einstein@home, go far further in recognizing your contribution to science. If you happen to discover a new binary radio pulsar, new gamma-pulsar or a new source of gravitational waves (Einstein@home is looking for such things), your name will be published in The Astrophysical Journal (a very prestigious scientific publication), as a co-discoverer. You will also receive a discovery certificate from the project scientists.

More interested in mathematics? If you happen to find a new large prime-number (through PrimeGrid BOINC project), your name will be published in Chris Caldwell's The Largest Known Primes Database. Both Einstein@home and PrimeGrid (and 28 other scientific projects) are whitelisted by Gridcoin, meaning that if you are running either (or both) of them on your PC, you will also receive Gridcoins as a reward for your computing efforts.

Original article by Vortac of CryptoCoinTalk, re-posted with his permission.

Thursday, September 15, 2016

FXCM Releases Spreads Report for Major Forex Pairs for 2015



New York-based Forex Capital Markets (FXCM) has released a comprehensive Spreads Report for 2015, detailing average spreads throughout last year on Standard, No Dealing Desk trading accounts.
“The data in this report is derived from real, tradeable spreads available to FXCM clients with Standard accounts from January 1st, 2015 through December 31st, 2015.”
According to figures stated in the report, the average spreads on the EUR/USD, AUD/USD and USD/JPY were 0.3 pips at peak trading hours, with “75% of EUR/USD, 62% of USD/JPY, and 61% of AUD/USD volume” being traded at peak hours.

FXCM considers peak hours to be between 1am to 1pm EST during the week, excluding weekends. During non-peak hours, average spreads on the four major pairs were doubled:
The report also showed the average total cost to open a 1k position on each part through the year:


Tuesday, September 13, 2016

Indian Renewable Energy Giant Suzlon Loses 900 Million Rupees Due to Forex Costs



Suzlon Energy Ltd., one of the world’s biggest renewable energy companies, released Q1 results for financial year 2016-17 (FY17), which showed the company taking a loss of 2.6 billion rupees, partly due to Forex costs and the new accounting standards (IND AS).

The loss was exacerbated by the fall of the Indian rupee over the last few months, causing Suzlon to loose 900 million rupees in connection with the refinancing of $590 million in debt in April, 2016.

Suzlon CFO Kirti Vagadia, told Bloomberg that new accounting standards forced the company to report the entire 900-million-rupee Forex loss in Q1. Under previous standards, the loss would have been stretched out over the entire maturity of the debt.

The new Indian Accounting Standards essentially reclassified Suzlon’s debt restructuring costs as a liability, instead of a potential liability under previous rules, which added an additional 120 million rupees to the Forex loss, according to Vagadia.

Regardless of the additional FX loss, Suzlon reported a 16.5 billion rupees in revenue for Q1, and CEO J.P.Chalasani said that the future of the renewable energy sector in India is looking very good:
“The country witnessed record renewable energy installations in FY16 and the industry will surpass it by over 30% in the current fiscal. Combined, wind and solar capacity has surpassed hydro capacity and is only next to coal‐based capacity in India.”
The company's report also highlighted the strong support for the renewable energy industry coming from the Indian government, which has set a target of 175 GW of renewables by the year 2022.
“India’s commitment at COP21 to achieve 40% renewables by 2030 will continue to fuel demand for clean energy”
Headquartered in Pune, India, the 8000-employee company currently holds approximately 36% of the entire Indian wind turbine market.

Multi-coin Wallet Provider Holytransaction Shuts Down



Holytransaction S.A., a Luxembourg-based universal digital currency wallet provider with an integrated exchange, instructed all of its clients to withdraw available balances as the company will be ceasing operations by the end of this month.

The firm was launched in 2014 by Andrey Zamovskiy, Francesco Simonetti and Nickolay Babenko with a $25,000 seed funding round. The service was aimed at non-technical consumers, who were looking to dabble in digital currencies but did not want to deal with the intricacies maintaining multiple wallets for different digital assets.

The Holytransaction multi-currency wallet supported Bitcoin, Litecoin, Peercoin, Dogecoin, Dash, Blackcoin, Tether, Omni and science-oriented virtual currency Gridcoin, which was added on September 23, 2015. However, some members reported problems with the service and lack of communication and customer support.

In today’s statement, Holytransaction cites lack of additional investment in the company as one of the principals reasons for the closure:
“We’ve got some investments to keep development of the service. So far our investments are finished and we neither have any significant income neither new round of investments to keep this service running.“


Sunday, September 11, 2016

LocalBitcoins Issues Instructions in Russian on Using TOR and VPN to Circumvent Roskomnadzor Blockade



Roskomnadzor, the Russian agency charged with monitoring all communications within the country, has blocked access to LocalBitcoins.com, the largest P2P digital currency marketplace in the world.
“For us, as well as for you, this decision was very unexpected,” said LocalBitcoins.
The ban comes at a time when the popularity of the digital currency within the Russian Federation is surging. Last week, LocalBitcoins weekly volume in Russia set a 9th consecutive record at 237,834,818 Russian rubles ($3,671,748.62). The only other country that comes close to the rapid growth seen in Russia would be Venezuela, which set its 2nd consecutive weekly volume record on LocalBitcoins last week.

Charts from Coin.dance illustrate the rapid growth of LocalBitcoins turnover in Russia:


LocalBitcoins responded by issuing instruction in Russian on their blog on how to use a VPN service (IPVanish, Mullvad, NordVPN) to circumvent the blockade:
“It is not recommended to use a free VPN services, because they can keep track of your traffic that is not safe. If you do not want to pay for VPN services, we recommend that you begin to use the TOR browser (TOR browser) to access the LocalBitcoins.com”
And LocalBitcoins isn’t the first bitcoin-related site to face the wrath of Roskomnadzor. In May of last year, the agency blocked access to Russian news site BitNovosti.com, Btcsec.com and Bitcoin.it. Earlier this year, Roskomnadzor blocked Russians from accessing Bulgarian digital currency exchange BTC-e.

Russian regulators and central bank officials have been battling over virtual currency legislation for several years now. More recently, Russia’s deputy minister of finance Alexei Moiseyev told TASS news agency that a direct ban on bitcoin would not be the right move, adding that consultations with experts will be held to determine the right course of action.

Moiseyev’s comments were interpreted by many in the Bitcoin community as a sign that authorities in Russia were warming up to the technology. However, the abrupt Roskomnadzor ban on LocalBitcoins casts a big shadow over the future of the digital currency industry in the Russian Federation.

Friday, September 9, 2016

Science-focused Digital Currencies Gridcoin, CureCoin, FoldingCoin and Einsteinium See Massive Rallies, Questions Raised by Crypto Community



Several science-oriented digital currencies experienced massive price surges over the last 24h on Poloniex, one of the most popular exchanges in the digital currency space.

FoldingCoin (FLDC) and CureCoin (CURE), two virtual currencies that are minted by miners performing protein folding simulations for Stanford’s Folding@home project, were up over 700% and 300% at their peak yesterday, respectively. Additionally, the ramp up in price was on very heavy volume.

FLDC was driven to an all-time high of 820 Satoshi (0.00000820) and CURE hit a high of 0.00046 on record-breaking volume.

At press time, data from CoinMarketCap shows FoldingCoin’s 24h volume currently stands at $2,970,540, while CureCoin volume comes in at $754,570. Staggering figures when compared to the average daily volume on these two assets, which usually hovers around 5-10 BTC on a good day!



Similar spikes in volume and price were also observed yesterday in Gridcoin (GRC), a digital currency minable via Boinc crunching, and Einsteinium (EMC2), a philanthropic coin that focuses primarily on the funding of scientific research.

The Gridcoin digital currency hit a high of 3898 Satoshi (0.00003898) yesterday on a volume of 776.51 BTC, according to data from Poloniex, while CoinMarketCap shows 24h volume at 1,186 BTC ($736,760). This volume figure is an all-time high for Gridcoin, eclipsing the big surge of 482.45 BTC on May 20, 2016, when a Gridcoin infographic hit the front page of Reddit, causing the price of the digital currency to spike to an all-time high of 9299 Satoshi (0.00009299 per Bitcoin):



While Einsteinium’s jump was notable with a 24h volume at 333.36 BTC ($206,925), it was nowhere near GRC, CURE and FLDC. And yesterday’s action pales in comparison to the run up on July 5, 2016, when EMC2 hit a high of 770 Satoshi (0.00000770) on a volume of 1188 BTC.

The community responds:

The savage price action on the science-friendly coins has left many traders in absolute bewilderment. With no apparent breaking news or major technical developments, some have begun to question the reasons for the unexpected run up in price.

Several members on Bitcointalk, the largest forum for digital currencies, have suggested that Poloniex is behind these events in order to bring a greater awareness to some alternative digital currencies and thus profit from trading fees, “That's the world of cryptocurrencies - a crazy little ship floating on an ocean of fiat. By the way, traders are having the time of their lives,” writes one member.

Youtuber CryptoMarket attributed the interest in these types of digital currencies to "buyers who just want to get in because they're into science, and they're sort of new to cryptocurrencies, and they just think it's awesome."

Others have proposed that alternative cryptocurrencies get increased attention from deep-pocketed speculators, who are looking to make a quick buck when Bitcoin gets into overbought territory and new trading opportunities are sought.

Regardless of the underlying reasons for yesterday’s bizarre ramp up, the event is bound to bring more attention to important scientific projects like Folding@Home and Boinc, as well as blockchain-based digital assets that contribute to the advancement of scientific knowledge.

Wednesday, September 7, 2016

Deloitte Launches Its First Bitcoin Teller Machine in Toronto Office

Image credit: Deloitte Touche Tohmatsu (Deloitte Touche Tohmatsu 2007 annual review) [Public domain], via Wikimedia Commons


Deloitte, one of Canada’s leading professional services firms, launched its first Bitcoin ATM (BTM) at one of its offices in Toronto, Canada. Deloitte has been involved heavily in the blockchain & fintech space over the past two years.

In May of this year, the firm established a 50-person blockchain developer lab in Dublin, Ireland. Deloitte also collaborated with BlockCypher, Bloq, ConsenSys Enterprise, Loyyal and Stellar on twenty different blockchain-based prototypes for the financial industry, four of which were unveiled at the Consensus 2016 blockchain conference in New York.

Deloitte has also released several papers on the applications of blockchain technology in financial markets (Blockchain Enigma. Paradox. Opportunity), as well as a report which highlighted Israel’s rise as a global financial technology center.

The firm has mostly focused on private and permissioned blockchain systems, but yesterday’s unveiling of the new Deloitte BTM is a first for the financial services giant.

Several photographs surfaced on Twitter of the new Deloitte BTM. Michael Perklin, President of The CryptoCurrency Certification Consortium, was photographed yesterday operating the new BTM: Two other photos from the Twitter feed of blockchain advocate Hillary Carter, shows Iliana Oris Valiente - co-founder of Rubix, Deloitte’s blockchain application development team - standing next to the Deloitte BTM: Deloitte's BTM was supplied by Canadian manufacturer Bitaccess, which features a large touch screen, allowing users to turn cash into digital currency and vise-versa.

Tuesday, September 6, 2016

BIS 2016 Survey Shows Global Forex Turnover Dropping for the First Time Since 2001

The Bank for International Settlements in Basel. Photo: Reuters


Figures in the newly released Triennial Survey for 2016 - which is the most comprehensive study of trends and data in the global FX marketplace, conducted by the Bank For International Settlements (BIS) every three years - revealed that daily turnover in the Forex market has dropped for the first time since 2001. The BIS has been keeping track of FX market activity since 1986.

Daily FX volume averaged close to $5.1 trillion in April of 2016. In April of 2013, when the last survey was conducted, global FX volumes were close to $5.4 trillion.

The 2016 survey also revealed the rapid decline in global spot FX transaction volume. During the last survey, daily turnover in spot transactions was $2 trillion, in April of 2016, this figure had dropped to $1.7 trillion per day - a 15% drop.
“This decline in spot trading was the main driver behind the overall fall in global FX turnover compared with 2013.”
However, FX swaps volumes have risen from $2.2 trillion in April of 2013 to $2.4 trillion in April of 2016. Forex swaps are primary used by financial institutions and companies, and the survey highlighted that the 8.3% rise in FX swap turnover came mainly from transactions involving the Japanese yen.

The winners:


The U.S. dollar is still king with $4.458 trillion in daily turnover; $1,387 billion in spot transactions; $600 billion in outright forwards; $2,165 billion in FX swaps; $88 billion in currency swaps; $218 billion in FX options:

Chart source: http://stats.bis.org/statx/srs/table/d11.1


While the dollar represents 88% of all daily FX turnover globally, the United Kingdom retains its crown as the FX trading capital of the world, registering $2.426 trillion in daily volume in the Triennial Survey for 2016. That is almost double the figures for the U.S., which came in at $1.272 trillion per day:

Chart source: http://stats.bis.org/statx/srs/table/d11.1

The Chinese renminbi yuan has also become the 8th most traded currency in the world, with an average daily volume of $202 billion.
“The renminbi doubled its share, to 4%, to become the world’s eighth most actively traded currency and the most actively traded emerging market currency, overtaking the Mexican peso. The rise in the share of renminbi was primarily due to the increase in trading against the US dollar.”
Besides the yuan, the Canadian dollar, British pound, Norwegian krone and Swedish krona have gained share in the global FX market. The recent survey also demonstrated that several emerging market currencies like the Korean won, Indian rupee and Thai baht have jumped several spots on the global FX leaderboard.

The losers:


Figures from the Triennial Survey for 2016 revealed the euro has been losing share in the global FX market in the aftermath European debt crisis in 2010. In fact, the euro’s share has been declining since April of 2010, when the currency had 39% market share. By 2013, that number was down to 33%, and the 2016 figures came in at 31 percent.

While trading in the EUR/SEK and EUR/NOK has increased, turnover in all other euro pairs has slowed down.
“Trading in the four most actively traded euro currency pairs – USD/EUR, EUR/GBP, EUR/JPY and EUR/CHF – fell. USD/EUR average daily turnover declined by $119 billion, while the relative declines were most pronounced for the EUR/JPY and EUR/CHF pairs.”
The Japanese yen’s market share has dropped by 1%, while the Australian dollar and Swiss franc lost 1.7% and 0.4%, respectively.
“Trading in the three most actively traded yen cross rates – USD/JPY, EUR/JPY and JPY/AUD – contracted significantly from 2013 to 2016.”


FXCM Releases New Forex Market Depth Indicator for 17 Currency Pairs

New York-based forex broker FXCM announced today their new Forex Market Depth Indicator, which is exclusively available as of today to clients using the broker’s flagship platform, Trading Station.

Unlike futures contracts and other financial derivatives, where open interest and sentiment data is easily available due to centralizing clearing venues, the currency market is decentralized across the globe and these metrics have been difficult to source in the past.

The new FXCM indicator reveals five levels of liquidity for 17 major currency pairs, however, only standard accounts will be able to make use of the new offering. The Forex Market Depth Indicator pulls data from FXCM’s seventeen liquidity providers:



Currency traders - especially scalpers and short term traders - will benefit greatly from this indicator as they will be able to examine how much volume is available at certain price levels. This kind of detailed information gives traders a much better view of the underlying liquidity conditions of each market.


Drew Niv, CEO of FXCM, said:
“Our team is consistently working to develop new advanced technology and optimize our clients' trading experience.”
Over the past two years, FXCM has released several powerful indicators to give its clients an edge in the FX marketplace. For instance, the Speculative Sentiment Index (SSI) - which was released before the Market Depth Indicator - plots FXCM retail trader positioning in real-time on the charts.

Monday, September 5, 2016

Dollar Shortage Intensifies in Azerbaijan, Multiple Banks in Baku Refuse Forex Transactions

Flame Towers in Baku, Azerbaijan - Image credit: cntraveller.com


Banks, lenders and currency exchange kiosks in Azerbaijan have started restricting foreign currency sales - U.S. dollars in particular - as the Azerbaijani manat continues to lose ground due to fears of further devaluation and declining oil prices.

The manat took a big nosedive on December 20, 2015, when the central bank decided to remove its dollar peg. The Azerbaijani currency dropped close to 32 percent that day to 1.55, and the manat has continued to drop against the dollar thru 2016. The USD/AZN closed today at 1.66436 - an all-time high.
Chart source: XE

The horrible performance of the manat has sent Azerbaijani merchants and investors into foreign currencies en masse, causing a severe dollar shortage in the region. Earlier this year, the central bank tried to fight the shortage by imposing a limit on the amount of dollars banks could sell to their clients on a daily basis, which was set at $500.

But as Reuters reports today, out of six banks interviewed; three banks in the capital city of Baku have suspended foreign currency transaction altogether; three banks only allow $100 a day per client.

The caps have also created a thriving black market, where the USD/AZN trades close to 2.

Some Baku merchants like Akif Shukyurov - who regularly converts his manat denominated revenues to dollars in order to pay his suppliers - tells Reuters that he can’t complete his transactions due to the extreme dollar shortage in the country.

The biggest supplier of dollars in the region is the sovereign wealth fund, Sofaz, which holds auctions twice a week, where $50 million is disbursed to banks. But the demand for dollars towards the end of August was close to $750 million, according to a Marja.az, a financial news outlet in Baku.

Just like the inadequate and ineffective attempts by the Nigerian central bank to remedy the dollar shortage in Nigeria, the policies of the Azerbaijani central bank have also failed, despite multiple interest rate hikes this year.

Financial regulators have attributed the growing demand for dollars to seasonal trends, saying that demand is driven up at the end of the summer as merchants need to make foreign currency payments.

Rufat Abbasov, an aide to the head of the Financial Markets Supervisory Authority, explained to Bloomberg in an interview:
“We were expecting this to happen because economic activity intensifies at the end of summer and the beginning of autumn. This is the time when many companies make payments to their foreign partners.”