Currency Manipulation – The Fall of the British Pound and Global Implications

9th October 2016 / United Kingdom

CNBC reports: The British pound took a dive on Friday, tanking as much as 6 percent, as traders scrambled to assess the cause of the heavy selling. The currency fell to $1.1819 in early Asian hours, hitting its lowest level since 1985—a year when it hit $1.0520 amid an acrimonious mining industry strike. The currency later recovered [5%] to hover at the $1.24 handle by the afternoon session of Asian trade.

Friday’s fall was the most aggressive since results of the Brexit vote emerged on June 24, according to spread-betting firm IG. – Market speculation was rife that the decline was the result of a wrongly entered trade. Because there was no news so far to justify the pound’s wild swing, it could be the result of a ‘fat finger’ [mistake], said Elias Haddad, senior currency strategist at Commonwealth Bank of Australia.

 John Gorman, head of non-yen rates trading at Nomura Securities, said via email that there were two theories floating around. “First, it was a fat finger or a trade entered mistakenly. The second possibility, which sounds more reasonable, is that there is a large barrier option that traded and that caused the selloff in light liquidity.”

Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, echoed that view. “It’s a low liquidity sell-off. Typically, when we see this, the reversal is violent but with fundamental support, the pound could find a new range between 1.22 and 1.25 per dollar,” she said in e-mailed comments.

But because other currencies did not see corresponding moves, it may not be a liquidity issue, flagged ‎UBS’ chief Asia-Pacific investment officer Kelvin Tay. Indeed, other currencies were stable on Friday, with the euro down 0.30 percent to $1.1117 while the was 0.15 percent stronger at $103.90.

Not everyone believed the fat-finger theory either. “Usually, fat finger errors don’t have the continuity that we’re seeing right now. There’s a chance that it might been an error but I don’t think we haven’t seen the last of the lows,” Ashraf Laidi, CEO of Intermarket Strategy, told CNBC’s “Squawk Box”.

Friday’s moves cap a volatile week for the currency, bringing its week-to-date losses to over 4 percent, according to Reuters data. On Thursday, it traded around $1.2720 after hitting what was also a 31-year low of $1.2686 on Wednesday. The selling began to accelerate following British Prime Minister Theresa May’s announcement on Sunday that Article 50, a piece of legislation that launches the exit process, could start by the first quarter of 2017.

Press TV interviewed Peter Koenig – an economist and geopolitical analyst. He is also a former World Bank staff. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media, TeleSUR and other internet sites.

PressTV Question: How do you see this sudden fall of the British Pound? Is it a ‘mistake’ as some say, or does it have to do with BREXIT and with Prime Minister Theresa May’s announcement that the exit process could start by the first quarter of 2017?

Watch the interview HERE

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Peter Koenig is an economist and geopolitical analyst. He is also a former World Bank staff and worked extensively around the world in the fields of environment and water resources. He writes regularly for Global Research, ICH, RT, Sputnik, PressTV, The 4th Media, TeleSUR, The Vineyard of The Saker Blog, and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.

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