The Central Bank of Brazil Sold USD 3 Billion

Posted on December 26, 2024 by Ignacio Teson

As President Lula da Silva’s government explores alternatives to curb economic uncertainty, the Central Bank of Brazil has achieved a temporary positive impact on the foreign exchange market.

On Thursday, the Central Bank sold $3 billion in a spot auction, continuing a series of interventions in the currency market amid a significant outflow of U.S. dollars from Latin America’s largest economy.

Following the auction, which was announced late Monday ahead of the Christmas holiday, the [[USD/BRL}} appreciated by 0.5% against the dollar.

[[USD/BRL-graph]]

However, the Brazilian real has experienced a steep devaluation of 24% against the U.S. dollar this year, despite the Central Bank’s efforts, which have included injecting more than $15 billion to stabilize the currency. The outlook remains uncertain.

Unavoidable Depreciation

While Lula da Silva’s administration has implemented measures such as tax reform and other economic strategies aimed at improving the situation by 2025 and 2026, the results have fallen short of expectations.

The proposed tax reform, designed to simplify the tax system by replacing multiple levies with a single value-added tax, has sparked market uncertainty.

Concerns arise from the reform’s centralization of tax collection under the federal government and its management by an expanded council, which has raised questions about its impact on the current tax structure.

As a result, the real continues to fluctuate, reaching a high of 6.30 per dollar. Additionally, speculation continues to weigh on both the stock market and the currency’s performance, and the measures taken so far have failed to stem the devaluation.

Over 30% of South Koreans Invest in Cryptocurrencies

Posted on December 25, 2024 by Ignacio Teson

South Korea’s cryptocurrency user base reached 15.6 million in November, surpassing 30% of the population.

The number of cryptocurrency holders in South Korea increased in November following Donald Trump’s victory in the U.S. presidential elections.

On December 25, South Korean news outlet Yonhap reported that in November, the number of cryptocurrency users in the country grew by 610,000. Representative Lim Kwang-Hyun from the Democratic Party of Korea shared data showing that by the end of November, digital asset investors in the country had reached 15.6 million.

[[BTC/USD-graph]]

With a population of 51.7 million, these 15.6 million cryptocurrency holders represent more than 30% of South Korea’s population. According to Yonhap, this figure includes users across the five major South Korean exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax.

Record Usage of Crypto in South Korea

The new Virtual Asset User Protection Act of the country’s Financial Services Commission (FSC) came into effect on July 19. Under this regulation, virtual asset service providers must ensure the protection of users’ crypto assets.

Yonhap also noted that the data was collected and published following the country’s new regulation on cryptocurrency exchanges. This marked the first time such statistical data related to cryptocurrencies was made public.

In addition to the number of users, the data showed that South Koreans hold approximately 102.6 trillion Korean won (USD 70.3 billion) in crypto assets. The outlet also noted that the country’s cryptocurrency transaction volume is now posing a threat to the local stock market.

Fitch upgraded the credit rating of Argentine banks.

Posted on December 25, 2024 by Ignacio Teson

Fitch Ratings has upgraded the operational environment rating for Argentine banks from “CCC-” to “CCC,” while changing the outlook from negative to stable.

According to a report by the international credit rating agency, the challenges faced by Argentine banks have gradually eased due to the growth in private sector credit. Additionally, asset quality and profitability indicators have performed better than expected.

Despite the challenging environment, Fitch forecasts that credit growth will improve in 2025, driven by economic recovery, higher private credit demand, and the continued reduction in the banking sector’s exposure to the public sector. This will increase the banks’ capacity to lend to the private sector.

Fitch expects the recent trend of improvement in non-performing and non-productive loans to continue, while capital and liquidity ratios should remain strong, given that banks have relatively low direct exposure to the government.

Forecasts and Projections of Argentina

Fitch projects a 3.6% contraction in GDP for 2024, followed by a 3.9% rebound in 2025, with considerable uncertainty depending on the outcome of capital controls.

Real interest rates are also expected to turn positive as money demand recovers and the Central Bank normalizes monetary policy, while inflation decreases.

On a global scale, Fitch anticipates that both global and domestic interest rates will continue to fall until 2025, which will help reduce medium-term financing costs.

Soybean Prices Extend Rebound After Four-Year Lows

Posted on December 25, 2024 by Ignacio Teson

Soybean futures on the Chicago Board of Trade (CBOT) closed higher on Tuesday, supported by short-covering and a continuation of last week’s recovery from a four-year low.

Corn futures also edged up, while wheat prices declined ahead of the reopening of U.S. grain markets.

March soybean futures rose 0.6% to $358.34 per ton, corn climbed 0.2% to $176.57, and wheat fell 1.1% to $196.48 per ton.

The soybean market has been under pressure recently due to forecasts of a record crop in Brazil, the world’s largest soybean exporter and a key competitor to the United States in global markets.

A recovery in soybean meal futures, which also dropped to their lowest level since 2020 last week, provided additional support to soybeans.

Meanwhile, a strong U.S. dollar weighed on grain markets, as it makes American agricultural products more expensive in export markets, traders noted.

The U.S. Department of Agriculture (USDA) is scheduled to release its weekly export sales data for grains and soybeans on Friday, delayed by one day due to the Christmas holiday. This report will be closely watched for updates on export demand amid shifting global dynamics.

The rebound in soybean prices could benefit producing countries such as Ukraine, Argentina, and Brazil, as well as their respective currencies.

As major exporters of soybeans, these countries stand to gain from higher global prices, which could boost their agricultural revenue. In turn, this increased revenue may strengthen their local currencies by improving trade balances and attracting foreign investment.

El Salvador’s Congress Approves Law Allowing Metal Mining

Posted on December 25, 2024 by Ignacio Teson

El Salvador’s Congress has passed a law allowing metal mining in the Central American nation, ending a seven-year prohibition.

The decision, backed by 57 out of 60 legislators from the ruling majority and allies, has sparked widespread criticism from environmental groups over potential ecological risks.

The Mining Law

The legislation, promoted by President Nayib Bukele, permits the exploration, extraction, and processing of metal resources from both terrestrial and maritime territories.

However, it designates the state as the sole entity authorized to conduct mining activities, eliminating the granting of concessions, licenses, or permits to private entities. The law also bans the use of mercury in mining operations.

Ecological Questions

The government has committed to declaring certain areas incompatible with metal mining, including forests, protected natural areas, water recharge zones, and urban regions, to mitigate environmental impacts.

On November 27, President Bukele stated on X that studies have identified 50 million ounces of gold in just 4% of the potential mining area, valued at over $131 billion—equivalent to 380% of El Salvador’s GDP.

Despite assurances, protests erupted outside Congress, with demonstrators expressing fears that future projects could harm communities and ecosystems. Environmentalists and activists continue to oppose the law, highlighting concerns over the long-term sustainability of such ventures.

Ukraine Condemns Russian Attack During Christmas

Posted on December 25, 2024 by Ignacio Teson

These attacks occurred on the day Ukraine celebrated Christmas on December 25th for the second time in its modern history, aligning with Western traditions.

Ukrainian President Volodymyr Zelensky condemned the missile and drone strikes on the country’s energy infrastructure, calling the assault “inhumane.”

“Putin deliberately chose Christmas Day to attack. What could be more inhumane? Over 70 missiles, including ballistic ones, and more than 100 attack drones targeted our energy system,” Zelensky stated.

Authorities reported at least one fatality and six injuries as a result of the attacks.

Ukraine’s Foreign Minister, Andrii Sibiga, claimed that a Russian missile passed through Moldovan and Romanian airspace, emphasizing that “Russia poses a threat not only to Ukraine.” However, Romania later confirmed it had detected no missiles in its airspace.

War Outlook

This marks the 13th large-scale attack on Ukraine’s energy grid this year and the latest in Russia’s winter campaign against the country’s infrastructure. Zelensky noted that “more than 50 missiles” and several drones were intercepted, but others caused power outages across multiple regions.

Ukraine is enduring its harshest winter yet during nearly three years of war with Russia, which has intensified its bombardments as ground forces push forward in the east.

On Wednesday morning, the Russian Ministry of Defense claimed that its forces had shot down 59 Ukrainian drones overnight.

Mexican Peso Gains Slightly After Christmas

Posted on December 25, 2024 by Ignacio Teson

The Mexican peso strengthened in a session of light trading, as market participants remained focused on the outlook for interest rates and developments involving Donald Trump.

The exchange rate closed the session at 20.1962 pesos per dollar, compared to yesterday’s closing level of 20.2240 pesos, according to official data from the Bank of Mexico (Banxico). This movement represented a gain of 2.78 cents or 0.14% for the local currency.

The dollar fluctuated within a range, reaching a high of 20.2190 pesos and a low of 20.1236 pesos. Meanwhile, the U.S. Dollar Index (DXY) from the Intercontinental Exchange, which tracks the greenback against a basket of six major currencies, rose 0.14% to 108.19 points.

Mexican Peso Outlook and Context

Traders exhibited a sense of calm as the holiday season began, despite an economic outlook for 2025 that includes the anticipated return of Donald Trump to the White House and a less accommodative monetary policy from the Federal Reserve.

Last week, the Fed cut interest rates by a quarter of a percentage point, as the market had expected, but signaled that it would slow the pace of reductions in the coming year. In Mexico, Banxico also lowered its benchmark rate and hinted at the possibility of further adjustments.

Remember, you can access all our live rates on FXLeaders to track the Mexican peso in real time!

Oil Prices Rise Over 1% Amid Pre-Holiday Trading

Posted on December 24, 2024 by Ignacio Teson

Oil prices rose more than 1% on Tuesday, reversing losses from the previous session, driven by short-term market optimism and expectations of a slight supply contraction.

Trading activity winds down ahead of the Christmas and Hanukkah holidays. Brent crude futures climbed 95 cents, or 1.31%, to $73.58 per barrel, while West Texas Intermediate (WTI) crude futures gained 86 cents, or 1.24%, to $70.10 per barrel.

[[USOIL-graph]]

Market experts suggest that benchmark prices will likely hover near current levels in the short term as trading activity slows during the holiday season. Many participants are holding off until there is greater clarity on global oil balances for 2024 and 2025. Shifts in supply and demand this December have supported a somewhat less pessimistic outlook.

Oil Market Drivers

China’s plan to issue 3 trillion yuan ($411 billion) in special Treasury bonds next year, as Beijing ramps up fiscal stimulus to reinvigorate its faltering economy, also provided a boost to oil prices.

Analysts believe this could offer short-term support for [[USOIL]] crude near $67 per barrel.

Markets are also closely monitoring the U.S. economy, the world’s largest oil consumer, which recently posted mixed data.

While consumer confidence weakened in December, new orders for manufactured capital goods rose in November amid strong demand for machinery, and new home sales also rebounded. These indicators suggest the U.S. economy remains on solid footing as the year concludes.

Starbucks Strike to Extend to Over 300 Locations

Posted on December 24, 2024 by Ignacio Teson

The Starbucks strike will extend to more than 300 stores across the United States on Tuesday, with over 5,000 employees expected to walk off the job before the five-day work stoppage ends on Christmas Eve, according to the workers’ union.

Starbucks, which operates over 10,000 company-managed stores across the U.S., stated that 98% of its locations remained open on Tuesday, with about 170 stores closed.

Low Paying Jobs

The strike on Tuesday is expected to be the largest in the company’s history, said Starbucks Workers United. “These strikes are a first show of strength, and we have only just begun,” said a barista from Oregon in a statement from the union.

The union, representing employees at 525 locations nationwide, has called for strikes in 12 major cities, including New York, Los Angeles, Boston, and Seattle, over issues like wages, staffing, and scheduling.

Salary Negotiations

The strike began last Friday after negotiations between Starbucks and the union reached an impasse.

Starbucks declined to comment on the estimated impact of the strike on its overall operations, having previously stated that the expected impact would be “very limited.”

Earlier this month, the workers’ group rejected an offer that did not include immediate wage increases and only promised a 1.5% increase in the coming years.

2024: The Year of Bitcoin – What Drove Its Appreciation?

Posted on December 24, 2024 by Ignacio Teson

Bitcoin, the first and leading cryptocurrency, has seen a remarkable surge in 2024.

Few assets, including Nvidia’s shares, which belong to the artificial intelligence giant, have outperformed Bitcoin this year, driven by both economic factors and favorable conditions for its adoption.

The cryptocurrency’s optimism has driven its price from around $42,300 per [[BTC/USD]] at the end of 2023 to a recent high of $108,000, reflecting an impressive revaluation of more than 155%. Some consider this increase excessive, while others anticipate even greater rises.

[[BTC/USD-graph]]

Why Bitcoin Surged in 2024

Key intrinsic factors behind Bitcoin’s appreciation include:

Approval of Bitcoin ETFs: The launch of the first Bitcoin exchange-traded funds (ETFs), including those backed by major firms like Fidelity Investments and BlackRock, provided a significant boost to Bitcoin’s price.
The Halving Event: In April, the halving process reduced the reward miners receive for solving complex equations to earn Bitcoin, increasing the asset’s scarcity and pushing its value higher.
Active Corporate Investment: Companies like MicroStrategy, which openly invest in Bitcoin, are playing an increasingly important role in driving Bitcoin’s price. MicroStrategy is now part of the prestigious Nasdaq 100.
Technological Advancements: The increased computational power and reduced transaction costs through the Lightning Network have made Bitcoin more efficient and practical, enhancing its overall utility.

Macroeconomic Factors

Additionally, there are macroeconomic factors that have further fueled Bitcoin’s rise:

Inflation: Although inflation has shown signs of easing, concerns remain. Bitcoin’s deflationary nature has driven its rise in a manner similar to gold as a hedge against inflation.
Interest Rate Cuts: Reduced interest rates have weakened demand for the US dollar. If inflation stabilizes, Bitcoin’s deflationary appeal may lose relevance and be replaced by concerns over the dollar’s weakness.

Bitcoin’s ascent in 2024 is a combination of both intrinsic and external factors, positioning it as one of the most notable assets in global financial markets.