Tag Archives: mexico

The Fed Is Looking at a Very Different Dollar Than Wall Street

Bloomberg, Aug 24, 2015


That may spell trouble for investors.

By many popular measures, the dollar has traded sideways for the last six months. Then there’s the Federal Reserve’s measure.

The greenback is surging, according to an index the Fed created to track the U.S. currency versus 26 of the country’s biggest trading partners. It’s risen 1.3 percent beyond a 12-year high reached in March, when the central bank fired the first of a series of warnings that a stronger dollar may hurt growth and lower inflation.

At a time when the Fed’s tightening path has become one of the biggest drivers in the $5.3 trillion-a-day foreign-exchange market, the discrepancy between Wall Street’s view — largely based on the dollar’s performance against the euro and the yen — and that of policy makers may lead to a jolt for investors expecting recent ranges to persist. The rapid trade-weighted appreciation this quarter has come mostly against big exporters such as China and Mexico, and it undercuts the Fed’s goal of quicker inflation. It may trigger further jawboning from officials looking to cool the dollar’s broad gains as the Fed begins raising interest rates for the first time in almost a decade.

“The dollar still continues to strengthen on a trade-weighted basis and the Fed definitely takes that into the equation,” said Brad Bechtel, a managing director at Jefferies Group LLC in New York. “The risk is the Fed starts really emphasizing that, and the market would be caught offside.”

Yuan, Peso

The Fed’s trade-weighted broad dollar index measures the greenback against the currencies of 26 economies according to the size of bilateral trade. China, Mexico and Canada make up 46 percent of the gauge.

Meanwhile, most private-sector dollar gauges track a basket of the world’s most liquid, widely used currencies. Intercontinental Exchange Inc.’s U.S. Dollar Index, which serves as the benchmark for various futures and options instruments, has a 58 percent weight to the euro and 14 percent for the yen. It lacks representation from any emerging markets, which account for more than half of the U.S.’s total trade flow.

The two indexes had moved alongside each other until a month ago. The Fed’s broad dollar index surged 3.4 percent this quarter to a 12-year high as China devalued the yuan to support a slowing economy, while a renewed commodities rout undermined Canada’s loonie and the Mexican peso. The ICE dollar gauge dropped 1.9 percent during the same period.

 Measures Matter

“It’s important to be mindful of which dollar measures matter, especially if you’re looking at it through the Fed’s eyes,” Ellen Zentner, chief U.S. economist at Morgan Stanley, said on Bloomberg Radio. One of the criteria for the Fed to raise rates is “a leveling out of the trade-weighted dollar. At the time of the June meeting, they could check off that box. Today, they can’t.”

Dollar bulls as recently as March were buffeted by unexpected warnings from the central bank. On March 18, a few days after the Fed index rose to the strongest in more than a decade, Chair Janet Yellen said the dollar would be a “notable drag” on growth this year.

The same day, policy makers lowered their forecasts for the fed funds rate by almost half. The ICE dollar index dropped 1.2 percent over the next two weeks.

In the minutes from the Fed’s July meeting released last week, the dollar was mentioned 12 times, as some officials “continued to see downside risks to inflation from the possibility of further dollar appreciation and declines in commodity prices.”

Inflation Detriment

The dollar’s surge may restrain inflation and limit the Fed’s ability to raise interest rates, punishing the U.S. currency against some major counterparts, according to Nomura Holdings Inc.

“In coming months we’ll be looking at import price deflation that is the most severe we’ve had for many years,” said Jens Nordvig, a managing director of currency research at Nomura. “There may be opportunities to fade dollar gains in Group-of-10, where the direction of the Fed really is a key driver.”


Emerging Market Central Bankers Are Getting Nervous About Their Plunging Currencies

Bloomberg, Jul 31, 2015

Russia’s ruble, the Colombian and Chilean pesos and Brazil’s real have led the losses since mid-May, with each falling more than 10 percent.

The biggest decline in emerging-market currencies since the global financial crisis is quickly turning from a welcome event for countries seeking to make their economies more competitive into something destructive.

The selloff has become so swift and so deep that officials are abandoning hands-off policies on concern the drop will fuel inflation, deter investment from foreigners and act as a drag on their economies at a time when global growth is already decelerating. To counter the declines, policy makers from Mexico to South Africa and Turkey have either stepped up intervention, increased interest rates or signaled an end to monetary easing.

Wall Street firms aren’t optimistic. Morgan Stanley says more policy makers will be forced to act, and Goldman Sachs Group Inc. warns there’s no end in sight to the weakness in developing-nation currencies.


Here’s the damage report: All of the 24 most-widely-traded emerging-market currencies tracked by Bloomberg have weakened over the past month except for the Hungarian forint. An index of their exchange rates has dropped 8 percent this year to the lowest on record in data going back to 1993. The current pace of declines would make this the worst year since 2008.

Russia’s ruble, the Colombian and Chilean pesos and Brazil’s real have led the losses since mid-May, with each falling more than 10 percent. The Hong Kong dollar — which is pegged to the U.S. dollar — suffered the least, dropping just 0.02 percent.

Commodity Gluts

The declines extended to Friday, when the ruble tumbled 1.6 percent as of 8:49 a.m. in New York after an interest-rate cut. Russia already suspended dollar purchases to build reserves following a rout in the currency that almost wiped out its advance this year.

The Thai baht fell to a six-year low Friday, while South Africa’s rand reached the weakest level in more than a decade.

The reasons behind the carnage are easy to find. Interest rates in the U.S. are on the rise, drawing investors from around the world. At the same time, the prices of commodities that have fueled many emerging-market economies in recent years are back on the decline.

Fed Chair Janet Yellen has said she expects to raise U.S. interest rates this year as the labor market strengthens, with economists forecasting a move in September. Higher yields in the U.S. would make riskier assets in emerging markets less attractive, just as commodity-supply gluts and slower growth in China crimp demand for raw-material exports.

Boom Times

“Central banks are trying to preempt a little bit of the currency volatility that could come from when the Fed decides to lift off,” James Lord, Morgan Stanley’s global emerging-market strategist, said in an interview from London.

It hasn’t helped that many nations failed to implement structural reforms during the boom times to insulate their economies from such downturns.

“Commodity-exporting countries are readjusting to the new reality on the fiscal side, but that takes time,” Christian DiClementi, a money manager at AllianceBernstein, said in an interview from New York. “Monetary policy has to compensate for the sort of fiscal reforms that weren’t taken when they should’ve been.”

With nations such as Indonesia and Colombia seeing near-record deficits in their current-accounts — the broadest measure of trade since it includes investment — the drop in currencies is a “necessary adjustment to address imbalances,” Goldman Sachs analyst Kamakshya Trivedi said in a report Thursday. He predicts the rout will continue as governments struggle to adapt to a worsening global environment.

Foreign Reserves

With a near-record $7.5 trillion in foreign reserves, developing nations have tools to keep the currency declines from becoming disorderly. And as long as exchange rates remain flexible, emerging markets will avoid any serious crisis, said Pablo Cisilino, a money manager at Stone Harbor Investment Partners.

“That’s a long-term fundamental change in emerging markets that should make investors more comfortable about what’s going on, regardless of what happens,” he said.

Mexico’s central bank expanded its intervention program Thursday, quadrupling daily dollar sales to $200 million. Separately, it reduced the minimum price decline needed to trigger an extraordinary dollar sale — also for $200 million — to 1 percent, from 1.5 percent now.

Real’s Collapse

While policy makers kept their benchmark interest rate at a record-low 3 percent, officials have changed the dates of their decisions so they can react quicker to any Fed increase. Mexico will probably begin to raise borrowing costs in the third quarter, according to economists surveyed by Bloomberg.

Brazil has suffered a 21 percent collapse in the real this year and is on the brink of losing its investment-grade status after giving up on its fiscal target. The country’s central bank raised its key rate Wednesday to 14.25 percent, the highest among major economies, as it tries to damp above-target inflation and boost investors’ confidence.

Central banks across Africa have also been aggressively boosting interest rates to help stem currency routs. South Africa, Uganda, Angola, Kenya and Ghana have all tightened monetary policy this year to help ward off inflation.

In Malaysia, policy makers have intervened in the currency market by selling foreign-exchange reserves to support the ringgit, which has fallen to a 16-year low.

Turkey’s central bank has left its main interest rates unchanged after ending its easing cycle earlier this year due to currency weakness and accelerating inflation. Standard & Poor’s expects the country will begin tightening monetary policy over the next 18 months.

While growth in emerging markets is slowing, central bankers are finding that currency stability outweighs the potential economic drag from higher borrowing costs, said Morgan Stanley’s Lord.

“Currencies are still very much under pressure, so it wouldn’t surprise me at all to see a little bit more of what we’ve been seeing from other central banks,” he said.


IMF lowers global growth forecasts, cites U.S. weakness

Reuters, Jul 9, 2015


The International Monetary Fund on Thursday trimmed its forecast for global economic growth for this year to take into account the impact of recent weakness in the United States.

The International Monetary Fund on Thursday trimmed its forecast for global economic growth for this year to take into account the impact of recent weakness in the United States.

But the global financial institution said growth prospects for next year remain undimmed, despite Greece’s debt crisis and recent volatility in Chinese financial markets.

In an update to its World Economic Outlook report, the IMF said the global economy should expand 3.3 percent this year, 0.2 percentage point below what it predicted in April. Growth should speed up to 3.8 percent next year, it said, unchanged from earlier forecasts.

The IMF pinned much of the blame for the lower growth forecast on the United States. The U.S. economy contracted in the first quarter, hurt by unusually heavy snowfalls, a resurgent dollar and disruptions at West Coast ports.

The IMF said it expected the U.S. economy to grow 2.5 percent this year – it lowered the U.S. growth forecast last month from 3.1 percent in April. The IMF also said U.S. economic sluggishness had spilled over to Canada and Mexico.

“(But) the unexpected weakness in North America … is likely to prove a temporary setback,” the IMF wrote in the report.

The IMF also maintained its forecasts for a pickup in growth in the euro zone, despite Greece moving ever closer to the edge of default and an exit from the currency bloc as it races to find a last-minute third bailout.

“Developments in Greece have, so far, not resulted in any significant contagion,” the IMF said. “Timely policy action should help manage such risks if they were to materialize.”

In developing economies, the IMF said growth had been dampened by lower commodity prices, tighter financial conditions tied to the economic rebalancing in China and geopolitical factors.

Chinese stock markets have tumbled by more than 30 percent over the last month, prompting regulators to impose heavy-handed intervention to stem the rout.

The IMF said the market crash suggests China could face greater difficulties as it tries to move from an investment-led economic growth model to one focused on domestic consumption.

The Fund also repeated its warning that asset price shifts and financial market volatility could disrupt its predictions, though it expects the economic situation in Russia and the Middle East to calm down next year.


What Obama’s trade deal (likely) means for American jobs

CNN Money, Jun 12, 2015

What would President Obama’s trade deal do to my job?

That’s really what all the fuss is about on various trade agreements that President Obama is pushing.

The biggest deal of them all is known as the Trans-Pacific Partnership (TPP for short). It would reduce trade barriers between 12 countries– U.S., Japan, Vietnam, Mexico to name a few — that account for 40% of the world’s economy.


1. What’s the debate? The White House and Republican leaders say that’s great news for American workers. It would make it easier for millions of people in other nations to buy U.S. goods, which should create jobs.

“We’re going to see unprecedented growth in the middle class in the Asia Pacific from 570 million [in the] middle class to 3.2 billion in just the next 15 years,” Commerce Secretary Penny Pritzker told CNNMoney.

But Democrats and unions say history hasn’t shown that free trade is all that beneficial to workers at home. A deal like TPP would just make it easier for businesses to move jobs elsewhere, they argue.

“This trade agreement would continue the race to the bottom for American workers,” said Senator Bernie Sanders, a Democratic presidential candidate.

2. Who’s right? It’s difficult to answer that because TPP is being negotiated mostly in secret. You can’t just go read through the document like you can for most pieces of legislation.

On Friday, the House was supposed to vote on whether to give the president “fast track” authority, but in a big defeat for Obama, House Democrats defeated a key part of the bill. The issue is likely to come back for a vote next week.

If passed, the Obama administration would be able to negotiate and sign various trade deals — like TPP — with little legislative involvement. It would almost certainly mean that TPP would get done, at least in some form.

Here’s a look at what all this means for your job — and your neighbor’s.

3. What about my job? Workers in the auto, agricultural and energy industries likely have the most to gain. America’s top exports right now are cars, gas and planes and other spacecraft. Reducing trade barriers should make those industries thrive even more.

On the agricultural side, products like pork are in high demand elsewhere in the world. The U.S. could potentially set up and fill that void. But critics of the deal argue that workers for larger companies that have a global reach already will be in a better position to benefit than workers at smaller businesses.

The biggest question mark is what will happen to other manufacturing and service jobs. Nike, for example, has said it would create 10,000 new engineering and manufacturing jobs in the U.S. if TPP happens.

But economist Peter Morici of the University of Maryland calls it “simply a bad deal for ordinary Americans” because of “downward pressures on wages and worsened income inequality,” in a Washington Times op-ed. He says America’s free trade agreement with South Korea killed about 25,000 jobs, driving wages down and worsening income inequality.

4. Who profits from the deal? One of the most outspoken supporters of TPP is the U.S. Chamber of Commerce, the main lobbying group for big business. As the White House points out, exports have been a key driver of economic growth during the recovery, accounting for about a third of the rebound.

But critics like Democratic Senator Elizabeth Warren question whether anyone beyond big business executives and shareholders will benefit.

“U.S. multinationals, like GE and IBM, would still profit from the TPP by moving production to Asia to advantage labor and other resources made cheaper by manipulated currencies, but ordinary working Americans would face more unfairly advantaged foreign competitors, unemployment and even lower wages,” argues Morici.

5. Better conditions for whom? One of the missing details that the public doesn’t know right now is how many protections are in the TPP deal. The White House says the trade agreement will enforce better labor and environmental practices — at home and abroad.

If done right, it could give the U.S. more teeth to fight back when other countries try to undercut America. For example, the agreement is supposed to provide protection for the intellectual property of U.S. exports, from movies to software to prescription drugs. The White House was also trying to create an assistance program for workers who lose their jobs because of free trade agreements.

But the wording — and enforcement — is key.

“If you’re used to reading these trade agreements, the devil is absolutely in the details,” Thea Lee, the deputy chief of staff for the AFL-CIO, which is spearheading the left’s opposition to the deal, told CNN.


NEWS: First Majestic Produces 3.9 Million Silver Eqv. Ounces in Q1’15

Apr 13, 2015

First Majestic Silver Corp. (“First Majestic” or the “Company”) is pleased to announce that total production at its five operating silver mines in Mexico for the first quarter ending March 31, 2015 reached 3,905,270 equivalent ounces of silver, representing an 8% increase compared to the same quarter in 2014.

Total silver production for the quarter consisted of 2,776,855 ounces of silver, representing a 4% decrease compared to the same quarter in 2014. In addition, 11,286,880 pounds of lead and 6,349,692 pounds of zinc were produced, representing an increase of 31% and 136%, respectively, compared to the same quarter of the previous year. Also, 2,970 ounces of gold were produced, representing a 12% decrease compared to the first quarter of 2014.

Keith Neumeyer, President & CEO of First Majestic, states, “First quarter production of 3.9 million silver equivalent ounces was in-line with our annual guidance projections even though production was slightly behind our record fourth quarter numbers. Unusually high mill maintenance was required at three of our operations which negatively impacted the quarter. In addition, reduced underground development has restricted the operations. With the irregular maintenance now behind us, we are expecting to see an improvement in production in the second quarter. Also, with the recently announced $30 million financing, we will be increasing development at both the La Encantada and La Guitarra mines in order to improve those operations in time for the second half of the year. We also witnessed the best metallurgical recoveries during the quarter of 74% representing the highest consolidated recovery rate over the past 24 quarters – a testament to our teams focus in this area”.

Consolidated Production Results:

Quarterly Operational Review:

The total ore processed during the quarter at the Company’s five operating silver mines: La Encantada, La Parrilla, Del Toro, San Martin and La Guitarra, amounted to 631,609 tonnes, relatively unchanged compared to the first quarter of the prior year and an 8% decrease from the previous quarter. The decrease in tonnes compared to the prior quarter was primarily due to lower throughput rates at La Encantada, Del Toro and San Martin. Higher than usual mill maintenance was required at each of these mines in the quarter. In addition, due to the persistently low metal prices, management decided to curtail certain underground development projects which impacted throughput levels.

Average silver grades in the quarter for the five mines decreased by 13% to 186 g/t compared to 214 g/t in the first quarter of 2014 and decreased 8% compared with the previous quarter. Combined silver recoveries averaged 74% during the quarter, up from 66% in the same quarter of the prior year and higher than the fourth quarter average of 70%.

The Company’s underground development in the first quarter consisted of 9,828 metres, a 17% decrease compared to 11,772 metres completed in the previous quarter.

During the quarter, 13 diamond drill rigs were operating at the Company’s five operations. The Company completed 5,425 metres of diamond drilling in the quarter compared to 5,990 metres in the prior quarter, representing a 9% increase.

On March 31, 2015, the Company released a new NI 43-101 Technical Report on the La Guitarra Silver Mine following an aggressive two-year exploration program which included an extensive 35,575 metres of diamond drilling over 262 holes along with the examination of over 900 historical drill holes. The Company is now working towards updating the NI 43-101 Technical Report on the La Encantada Silver Mine which it expects to be released in the second half of 2015.

The table below represents the operating parameters at each of the Company’s five producing silver mines.

Mine by Mine Quarterly Production Table:

The following prices were used in the calculation of silver equivalent ounces: Silver: $16.72 per ounce; Gold: $1,219 per ounce; Lead: $0.82 per pound; Zinc $0.94 per pound.

At the Del Toro Silver Mine:

  • For the quarter, Del Toro achieved a new quarterly record production of 1,327,628 silver equivalent ounces representing an increase of 5% compared to the previous quarter. The plant processed 157,934 tonnes of ore through flotation with an average silver grade of 212 g/t. The increase in total production was primarily due to a 22% increase in lead production and a 4% improvement in silver recoveries, however, offset by a 10% decrease in throughput compared to the fourth quarter of 2014.
  • Lead production reached a new quarterly record of 9,657,640 pounds. Lead grades and recoveries averaged 4.2% and 66%, respectively, in the first quarter, an increase of 25% and 9% compared to the previous quarter due to higher quality sulphide ore production from the Perseverancia mine.
  • Underground development completed in the quarter totaled 1,686 metres compared with 2,095 metres developed in the previous quarter.
  • Four drill rigs consisting of three underground and one on surface were active in the first quarter at Del Toro. Total exploration metres drilled in the first quarter amounted to 2,285 metres compared to 559 metres drilled in the previous quarter.

At the La Encantada Silver Mine:

  • For the quarter, total silver production was 544,735 silver ounces representing a 31% decrease over the previous quarter primarily due to a 29% decrease in the silver grade, a 10% decrease in processed ore, offset by a 9% increase in recoveries. The reduction in grade was a result of mining lower grade stopes due to the decrease in the underground development that occurred during the quarter. The Company is planning on accelerating the underground development into the recently discovered Ojuelas ore body and is advancing the block caving system in order to have additional production areas ready for the ramp up to 3,000 tpd in July.
  • The foundations for the new 12′ x 24′ ball mill and fine ore bin were completed early in the quarter. In addition, the installation and integration of the new tertiary crusher area began in January. The total plant expansion to 3,000 tpd is now 60% complete and the expected ramp up to 3,000 tpd remains on track for July.
  • A total of 2,989 metres of underground development were completed in the first quarter compared to 4,344 metres of development in the previous quarter.
  • Three drill rigs were active underground at La Encantada during the quarter. A total of 828 metres of exploration drilling was completed in the first quarter compared to 3,367 metres of drilling in the previous quarter.

At the La Parrilla Silver Mine:

  • During the quarter, the flotation circuit processed 86,965 tonnes with an average silver grade of 165 g/t and an 88% recovery while the cyanidation circuit processed 85,682 tonnes with an average silver grade of 118 g/t and a 66% recovery.
  • Zinc production increased 39% compared to the previous quarter to 6,349,692 pounds due to higher grade production stopes within the Vacas mine.
  • During the quarter, an additional 235 metres were completed at the underground ore haulage level 11. To date, a total of 2.3 kilometres have been completed on the 5.0 kilometre electrical rail system project.
  • Underground development completed in the quarter totaled 2,077 metres compared with 2,378 metres developed in the previous quarter.
  • Three underground drill rigs were active within the La Parrilla property during the quarter. A total of 1,437 metres were drilled in the first quarter compared to 685 metres in the previous quarter.

At the San Martin Silver Mine:

  • During the quarter, San Martin produced a total of 571,937 silver ounces and 1,511 ounces of gold for a total quarterly production of 682,071 silver equivalent ounces. The slight decrease in production compared to the previous quarter was primarily due to a 9% decrease in throughput due to numerous shut downs caused by unseasonal heavy rains in the month of March and the repair of the transmission system of the 9′ X 9′ ball mill.
  • Underground development completed in the first quarter totaled 2,010 metres compared with 1,414 metres of development in the previous quarter.
  • One underground drill rig was active within the San Martin property during the quarter. Total metres drilled in the first quarter amounted to 266 metres compared to 943 metres of drilling in the previous quarter.

At the La Guitarra Silver Mine:

  • During the quarter, total production consisted of 196,920 silver ounces and 961 gold ounces. This represents a 14% decrease in silver production and a 32% decrease in gold production compared to the previous quarter. The decrease in total production was primarily due to an 8% decrease in throughput and a 22% decrease in gold grades.
  • Mine production within the El Coloso area delivered 27,700 tonnes (308 tpd) of ore during the quarter or approximately 60% of total throughput. The Company is working towards achieving 100% of production from the El Coloso area which will include the Nazareno area once an 800 metre drift can be constructed. Construction of this drift is planned to begin in May with completion in approximately six months.
  • A total of 1,066 metres of development were completed in the first quarter compared to 1,541 metres of development in the previous quarter.
  • Two underground drill rigs were active in the first quarter within the La Guitarra property. Total metres drilled in the quarter amounted to 609 metres compared to 436 metres drilled in the previous quarter.

Full release