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Neil Phillips faces trial over alleged forex market manipulation

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Neil Phillips faces trial over alleged forex market manipulation
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Neil Phillips, co-founder of Glen Point Capital and former hedge fund chief, is set to face trial next week in New York over allegations of manipulating the foreign exchange market tied to a $20 million transaction handled by Morgan Stanley. The bank’s involvement in the case was disclosed during an indictment revelation amid a dispute over expert witnesses.

Phillips’ trial strategy includes bringing forward a former JPMorgan Chase & Co. (NYSE:) trader to testify in his defense. This move emerged during a disagreement over expert witnesses, including ex-JPMorgan trader Andrew Newman, who will argue that Morgan Stanley should have hedged against the option involved in the alleged manipulation.

The prosecutors accuse Phillips of commodities fraud, alleging he directed $725 million in trades to inflate the South African rand’s value against the US dollar () with the aim of triggering the option at a barrier rate of 12.50 rand (USD1 = ZAR19.1782). This trial may determine the legality of “barrier chasing,” which Phillips argues is standard trading practice.

Glen Point Capital purchased the option through an intermediary and identified JPMorgan as its prime broker. Nomura Holdings (NYSE:) Inc. managed Phillips’ trades, and US District Judge Lewis Liman will oversee the expert testimony hearing.

Phillips was arrested in Spain in 2022 and extradited to the US to face these charges. The prosecutors have withdrawn the most serious wire fraud charges against Phillips, but he still faces a potential 10-year prison sentence if found guilty of these allegations.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Forex

China’s state banks seen supporting yuan as Moody’s cuts outlook – sources

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China's state banks seen supporting yuan as Moody's cuts outlook - sources
© Reuters. FILE PHOTO: U.S. Dollar and Chinese Yuan banknotes are seen in this illustration taken January 30, 2023. REUTERS/Dado Ruvic/Illustration/File Photo

SHANGHAI (Reuters) -China’s major state-owned banks were busy buying the yuan in currency markets on Tuesday to prevent it from weakening too much, two sources with knowledge of the matter said, with buying intensifying after rating agency Moody’s (NYSE:) cut China’s outlook to negative in the afternoon.

State banks were spotted swapping yuan for U.S. dollars in the onshore swap market and quickly selling those dollars in the spot market to support the yuan throughout the whole trading session, the sources said.

But the banks’ dollar selling became very forceful after the Moody’s statement, one source said.

China state banks have in the past year often sold dollars to slow the yuan’s decline against the U.S. dollar. Markets have often seen the moves as a sign of official attempts to relieve pressure on the currency, though banks could also be trading for their own accounts.

Moody’s on Tuesday cut its outlook on China’s government credit ratings to negative from stable, citing expectations of lower medium-term economic growth and risks from a deep correction in the country’s vast property sector.

With China’s economy sputtering and the U.S. dollar surging until recently, the yuan has had a volatile year, having weakened 6.14% to the dollar at one point before giving back much of the losses on recent views that U.S. interest rates have peaked.

The yuan strengthened 2.55% in November, its best month this year, but it is still down 3% year-to-date.

However, some analysts said the impact on the yuan from the Moody’s decision will not be sustainable.

“The issues plaguing the property sector are not new,” said Khoon Goh, head of Asia research at ANZ.

“The steps taken by the authorities recently should see a bottom soon. The upcoming U.S. data will be more important for the near-term direction of the yuan,” Goh said, referring to a spate of government measures to revive the real estate market.

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Dollar finds foothold ahead of jobs opening, services PMI data

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Dollar finds foothold ahead of jobs opening, services PMI data
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Investing.com – The U.S. dollar stabilized in early European trade Tuesday, near a one-week high, as traders scaled back dovish Federal Reserve bets ahead of key economic data releases.

At 04:30 ET (09:30 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded largely unchanged at 103.559, after recording its weakest monthly performance in a year in November.

Greenback finds support ahead of key data

The dollar was on the backfoot for most of November as traders began pricing in bigger rate cuts by the Fed next year than by any other major central bank.

However, the greenback has found some support with traders scaling back those bets ahead of the release of a series of important data releases this week, starting later in the session with U.S. and , before the widely watched on Friday.

“We suspect markets may be positioning ahead of next week’s Fed meeting, when Chair Jerome Powell may insist on his pushback against rate cut bets,” said analysts at ING, in a note.

“Today, however, market moves will be heavily impacted by two important data releases: JOLTS job openings and the ISM services. The first probably holds the keys to a bigger market reaction, given the proximity to U.S. payrolls data and the fact that markets are anxiously waiting for signs of a decisive turn lower in the jobs market to jump on bearish dollar positions.”

Eurozone heading for recession

In Europe, edged lower to 1.0835, close to Monday’s three-week low, after the eurozone’s rose to 47.6, its best reading since July, from October’s near three-year low of 46.5, and above a 47.1 preliminary estimate.

While the downturn in the region’s business activity eased last month, it still suggested the bloc’s economy will contract again this quarter, pointing to a regional recession. Last quarter the contracted 0.1%, according to official data.

tumbled to 2.4% last month from above 10% a year earlier, putting it close to the ECB’s 2% inflation target. 

The European Central Bank can take further interest rate hikes off the table given a “remarkable” fall in inflation and policymakers should not guide for rates to remain steady through mid-2024, ECB board member Isabel Schnabel, a known hawk, said Tuesday.

fell 0.1% to 1.2624, retreating further from its recent three-month top of 1.2733.

Aussie dollar slumps after RBA meeting

In Asia, fell 0.6% to 0.6581 after the held its benchmark interest rate steady at 4.35%, after hiking by 25 basis points in October.

Governor Michele Bullock said that the bank needed more economic cues before considering any more changes to monetary policy, but warned that inflation risks still persisted.

traded 0.1% lower to 147.07, some distance away from the three-decade low of 151.92 it touched in the middle of November, even as growth in the country’s services sector missed expectations in November.

traded largely unchanged at 7.1418, even as a showed the country’s services sector grew more than expected in November. But the yuan was presented with new downside risks from growing fears of another epidemic in the country, as local media reports showed a spike in respiratory illnesses across major Chinese cities.

 

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MUFG teams up with JPYC to enhance yen-backed stablecoin transactions

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MUFG teams up with JPYC to enhance yen-backed stablecoin transactions
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Mitsubishi UFJ Financial Group (NYSE:), one of Japan’s premier financial institutions, has entered into a partnership with JPYC Inc. to integrate the yen-backed stablecoin into its digital asset platform, Progmat. This move is aimed at streamlining services such as cross-border payments and comes as part of the financial giant’s broader strategy to embrace digital currency technology.

The collaboration was announced today and marks a significant step in the adoption of cryptocurrency in mainstream financial operations. Progmat, which was launched in September, is MUFG’s latest venture into the digital asset space, developed with the support of key partners like SBI Holdings and Mizuho Trust and Banking.

The integration of JPYC’s yen-backed stablecoin onto the Progmat platform is set against the backdrop of Japan’s evolving regulatory landscape for digital assets. Under new regulations, JPYC is preparing to issue a funds transfer stablecoin through Progmat while also transitioning to a trust-type stablecoin without transaction limits. This transition is subject to JPYC obtaining the necessary license, for which it has already applied, envisioning MUFG as the custodian bank holding the stablecoin reserves.

MUFG is also looking to facilitate currency conversions for Japanese users by enabling efficient exchanges between yen-backed stablecoins and their USD equivalents. This initiative follows MUFG’s research conducted in November on XJPY and , which investigated potential enhancements to settlement processes within the digital asset market.

The strategic alliance between MUFG and JPYC reflects a growing trend among traditional financial institutions to integrate cryptocurrency solutions into their service offerings. By doing so, they aim to provide customers with more flexible and efficient payment options that align with the global shift towards digital finance.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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