and gold as an int'l. reserve currency to finance global trade.
Modern exchange-rate volatility began when the US dollar came off the gold standard in August
1971. The foreign exchange market's biggest shock came three years later when Bankhaus
Herstatt failed to settle the New York legs of its dollar foreign-exchange deals. Banks in other
time zones, left with incomplete deals, or just fearing that they would arise, grabbed what they
could, causing a general panic. A handful of banks ended up losing money. It decimated the
medium-size German banks.
1971 Apr 1, The United Kingdom lifted all restrictions on gold ownership.
1971 Aug 15, Pres. Nixon suspended conversion of dollars to gold and imposed a 90-day price, wage
and rents freeze and 10% import charge. He also cut various taxes and expenditures. This marked the
end of the gold standard and fixed exchange rates.
1972 The Chicago futures market first began trading financial derivatives.
On 10 July 1967, the dollar replaced the New Zealand pound at a rate of 2 dollars = 1 pound when the
country decimalised its currency. The NZ$1 was initially pegged to the US dollar at a rate of US$1.39
= NZ$1. This rate changed on November 21 of the same year to US$1.12 = NZ$1 after the devaluation
of the British pound (see Bretton Woods system), although New Zealand devalued more than the U.K.
In 1971, the U.S. devalued its dollar relative to gold, leading New Zealand to peg its dollar at a value of
US$1.216 with a 4.5% fluctuation range on 23 December (keeping the same gold value). From 9 July
1973 to 4 March 1985 the dollar's value was determined from a trade-weighted basket of currencies.
The New Zealand dollar was floated on 4 March 1985 at 0.4444 USD, and since then, the
dollar's value has been determined by the financial markets, and has been in the range of about 0.39–
0.82 United States dollars. The dollar's post-float minimum average daily value was 0.3922 U.S.
dollars on 22 November 2000, and it set a post-float maximum on 27 February 2008, reaching 0.8213
USD. Much of this medium-term variation in the exchange rate has been attributed to differences in
interest rates.[citation needed] The New Zealand dollar's value is often strongly affected by
currency trading, and is among the 12 most traded currencies.
So now we know how the economic conditions were changing lets look at the the markets over the
last 30 years ....
According to Hans-Joerg Rudloff, now chairman of Barclays Capital, the years 1966 to 1969 "saw a re-
opening of the international financial markets after 40 years". They had been closed effectively since
1929.
Veterans remember those early days of Eurobonds and Euroloans as an era of excitement, vision and
idiosyncratic behaviour. Rudloff wasn't the first into the business. He was a humble equity salesman at
Kidder Peabody when the market started. But at Credit Suisse First Boston in the early 1980s, he
became the archetypal Eurobond syndicate boss: arrogant, powerful, ruthless, hard-living and
courageous.
There was another less glamorous side to the market, the Euroloan, responsible for recycling billions of
oil dollars to developing countries in the late 1970s, and perhaps later contributing to their economic
downfall.
Minos Zombanakis, then at Manufacturers Hanover, recalls his first sovereign floating-rate Euroloan,
$70 million for the shahdom of Iran in 1969. That was followed by a $200 million loan for Istituto
Modern exchange-rate volatility began when the US dollar came off the gold standard in August
1971. The foreign exchange market's biggest shock came three years later when Bankhaus
Herstatt failed to settle the New York legs of its dollar foreign-exchange deals. Banks in other
time zones, left with incomplete deals, or just fearing that they would arise, grabbed what they
could, causing a general panic. A handful of banks ended up losing money. It decimated the
medium-size German banks.
1971 Apr 1, The United Kingdom lifted all restrictions on gold ownership.
1971 Aug 15, Pres. Nixon suspended conversion of dollars to gold and imposed a 90-day price, wage
and rents freeze and 10% import charge. He also cut various taxes and expenditures. This marked the
end of the gold standard and fixed exchange rates.
1972 The Chicago futures market first began trading financial derivatives.
On 10 July 1967, the dollar replaced the New Zealand pound at a rate of 2 dollars = 1 pound when the
country decimalised its currency. The NZ$1 was initially pegged to the US dollar at a rate of US$1.39
= NZ$1. This rate changed on November 21 of the same year to US$1.12 = NZ$1 after the devaluation
of the British pound (see Bretton Woods system), although New Zealand devalued more than the U.K.
In 1971, the U.S. devalued its dollar relative to gold, leading New Zealand to peg its dollar at a value of
US$1.216 with a 4.5% fluctuation range on 23 December (keeping the same gold value). From 9 July
1973 to 4 March 1985 the dollar's value was determined from a trade-weighted basket of currencies.
The New Zealand dollar was floated on 4 March 1985 at 0.4444 USD, and since then, the
dollar's value has been determined by the financial markets, and has been in the range of about 0.39–
0.82 United States dollars. The dollar's post-float minimum average daily value was 0.3922 U.S.
dollars on 22 November 2000, and it set a post-float maximum on 27 February 2008, reaching 0.8213
USD. Much of this medium-term variation in the exchange rate has been attributed to differences in
interest rates.[citation needed] The New Zealand dollar's value is often strongly affected by
currency trading, and is among the 12 most traded currencies.
So now we know how the economic conditions were changing lets look at the the markets over the
last 30 years ....
According to Hans-Joerg Rudloff, now chairman of Barclays Capital, the years 1966 to 1969 "saw a re-
opening of the international financial markets after 40 years". They had been closed effectively since
1929.
Veterans remember those early days of Eurobonds and Euroloans as an era of excitement, vision and
idiosyncratic behaviour. Rudloff wasn't the first into the business. He was a humble equity salesman at
Kidder Peabody when the market started. But at Credit Suisse First Boston in the early 1980s, he
became the archetypal Eurobond syndicate boss: arrogant, powerful, ruthless, hard-living and
courageous.
There was another less glamorous side to the market, the Euroloan, responsible for recycling billions of
oil dollars to developing countries in the late 1970s, and perhaps later contributing to their economic
downfall.
Minos Zombanakis, then at Manufacturers Hanover, recalls his first sovereign floating-rate Euroloan,
$70 million for the shahdom of Iran in 1969. That was followed by a $200 million loan for Istituto
Comments
Post a Comment