14 / 50
In the first quarter of 2016, financial markets were hit by
the highest volatility since the financial crisis of 2008–
09. In fact, volatility in January was the highest it had
been since the Great Depression! Fortunately, as the
quarter ends, things are calmer. At the time of writing,
the U.S. dollar (USD) is at its weakest level in nine
months. This doesn’t necessarily mean, however, that
the worst is over. We first review quarter one foreign
exchange market (forex) events, then point out currency
risks moving forward.
What happened in quarter one?
On the first working day of the year, upon release of a
worse-than-expected China PMI Manufacturing Index
showing contraction for the tenth month in a row, the
Chinese stock market fell 7% and MSCI All Country
Global Index dropped more than 3%.
Volatility continued over the first six weeks of 2016
in large part over bad news from China and clumsy
measures taken by Chinese central bank (PBOC) to cope
with what seems an inevitable economic slowdown. On
6 January, the PBOC lowered its reference daily rate,
provoking a dive in the yuan to a five-year low rate
WHAT’S NEXT IN
FOREX MARKETS
AFTER A
CONVULSIVE QUARTER 1, 2016
IN THE FIRST QUARTER OF 2016, FINANCIAL MARKETS WERE HIT BY THE HIGHEST VOLATILITY
SINCE THE FINANCIAL CRISIS OF 2008–09. IN FACT, VOLATILITY IN JANUARY WAS THE HI-
GHEST IT HAD BEEN SINCE THE GREAT DEPRESSION! FORTUNATELY, AS THE QUARTER ENDS,
THINGS ARE CALMER. AT THE TIME OF WRITING, THE U.S. DOLLAR (USD) IS AT ITS WEAKEST
LEVEL IN NINE MONTHS. THIS DOESN’T NECESSARILY MEAN, HOWEVER, THAT THE WORST
IS OVER. WE FIRST REVIEW QUARTER ONE FOREIGN EXCHANGE MARKET (FOREX) EVENTS,
THEN POINT OUT CURRENCY RISKS MOVING FORWARD.
by EDUARDO GARZA CASTILLON SEGOVIA, Engineer, National President of the Treasury Technical Committee of
IMEF
14
MEXICO