{"id":39575,"date":"2023-12-07T06:51:41","date_gmt":"2023-12-07T06:51:41","guid":{"rendered":"https:\/\/www.africa-press.net\/eswatini\/?p=39575"},"modified":"2023-12-07T05:49:17","modified_gmt":"2023-12-07T05:49:17","slug":"currency-manipulation","status":"publish","type":"post","link":"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation","title":{"rendered":"CURRENCY MANIPULATION"},"content":{"rendered":"

Africa-Press – Eswatini. <\/strong><\/span>The South African Competition Commission, through its protracted eight-year case, has accused 28 banks for collusive trading activities and manipulating the Dollar\/Rand exchange rate.<\/b><\/p>\n

I know this is one issue that is close to heart and we are all wondering how this affects the economy and individual economic agents. Today, I will give my insights on the issue and localise it to Eswatini and what it could mean to you. My opinion is based purely on the normative of what could be if indeed the banks are found guilty of currency manipulation. This piece is meant to allay concerns and improve our understanding of currency markets and how they affect the daily lived realities of emaSwati.<\/p>\n

Foreign exchange market<\/b><\/p>\n

The foreign exchange market is the marketplace in which participants are able to sell, purchase, exchange and theorise on currencies. No country in the globe is self-sufficient in producing enough goods to meet its demand, all countries import and export certain commodities. Acquiring foreign goods requires access to foreign currency or a vehicle currency, which can generally be accepted as terms of payment for foreign commodities (legal tender). The Lilangeni that we use in Eswatini is a legal tender only in the kingdom, and not worth the paper it is printed on outside the kingdom. To facilitate trade, local traders need access to foreign currency and the banks usually offer this function.<\/p>\n

The banks<\/b><\/p>\n

Ideally, the price at which the local currency is exchanged for a foreign currency is determined by the forces of demand and supply and banks buy and sell foreign currency around this equilibrium price with a bit of spread (difference between the buy and sell price) and that is how they make profits from the forex platform. Usually, the buy and sell bids differ from bank to bank and from broker to broker, depending on the profitability preferences from each bank.<\/p>\n

However, banks know that if they veer too far off from the equilibrium, they will not have clients since buyers and sellers will always vote with their feet to institutions with a favourable rate closer to the equilibrium. How then can banks influence or collude to influence the rate at which the Dollar is exchanged for local currency? The collusion is successful if and only if all the banks or the major banks set the buy and sell at the same price or with marginal differences. If the open market exchange rate ought to be E18.105 for US$1, and they collectively agree to place it at E18.205, just a Rand above market equilibrium. I am guessing you are thinking it is just E1 difference, can this be harmful? What are the effects of this manipulation on the economy and individuals?<\/p>\n

The effects<\/b><\/p>\n

Importing companies require huge amounts to exchange for foreign currency. Imagine a textile company buying Yarn worth E2 billion at this exchange rate, for every Dollar they buy they lose a Rand to the bank. The costs to the individual company or people buying the foreign currency at the manipulated rates jump into the millions, which is a loss to the company or the individual buying the currency. To determine the macro-economic effects requires more information on the extent of the collusion. If all banks were doing this then the macro-economic effects would be profound, impacting interest rates, inflation rate and the overall growth trajectory of the country.<\/p>\n

However, at this point, we do not have any concrete evidence that all the 28 accused banks participated in the currency manipulation. The effects at this point would only be felt by producers and individuals who utilised Standard Chartered Bank, and the macroeconomic effects would depend on the relative size of these entities. If these entities are big enough to influence the overall price levels in the economy, then there is scope for macroeconomic effects, however, more evidence would be required.<\/p>\n

Domestic banks<\/b><\/p>\n

Eswatini is part of the Common Monetary Area (CMA), where our currency is linked to the Rand. One might speculate that if the Rand is manipulated, by extension the Lilangeni\/Dollar exchange rate has been manipulated. Normatively, that would be true, however, it depends on the extent of the collusion. If the dominos fall and all 28 banks implicated are found guilty, then the macroeconomic effects on the domestic economy would be significant since we would import an artificially high or artificially low exchange rate. It is comforting that our South African headquartered banks have not been implicated in the scandal, the likelihood of imported effects is relatively low.<\/p>\n

At this point, concluding would be nothing but pure speculation and might cast unnecessary aspersions on our financial sector stability, best wait for more concrete evidence. Furthermore, the activities of local banks are monitored and supervised by the Central Bank of Eswatini; given the relative size of the sector bank, supervision is not as complex domestically as it is in bigger economies such as South Africa. We learn from this scandal the importance of regulation in the economy; if left unchecked economic agents will atomistically maximise gains at the peril of others.<\/p>\n

Source: times<\/b><\/p>\n

For More News And Analysis About Eswatini<\/a> Follow Africa-Press<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

Africa-Press – Eswatini. The South African Competition Commission, through its protracted eight-year case, has accused 28 banks for collusive trading activities and manipulating the Dollar\/Rand exchange rate. I know this is one issue that is close to heart and we are all wondering how this affects the economy and individual economic agents. Today, I will […]<\/p>\n","protected":false},"author":84,"featured_media":39574,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2,6],"tags":[234,248,249],"class_list":["post-39575","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-all-news","category-files","tag-africa-press","tag-africa-press-eswatini","tag-eswatini"],"yoast_head":"\nCURRENCY MANIPULATION - Eswatini<\/title>\n<meta name=\"description\" content=\"The South African Competition Commission, through its protracted eight-year case, has accused 28 banks for collusive ...\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"CURRENCY MANIPULATION\" \/>\n<meta property=\"og:description\" content=\"The South African Competition Commission, through its protracted eight-year case, has accused 28 banks for collusive ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\" \/>\n<meta property=\"og:site_name\" content=\"Eswatini\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/AfricaPressTunisiaa\" \/>\n<meta property=\"article:published_time\" content=\"2023-12-07T06:51:41+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/static.africa-press.net\/eswatini\/sites\/33\/2023\/12\/sm_1701915468.983045.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1280\" \/>\n\t<meta property=\"og:image:height\" content=\"720\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"cfeditoren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"cfeditoren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\"},\"author\":{\"name\":\"cfeditoren\",\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/#\/schema\/person\/068c7ab4e9634ae78ec5d54ec46598bb\"},\"headline\":\"CURRENCY MANIPULATION\",\"datePublished\":\"2023-12-07T06:51:41+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\"},\"wordCount\":862,\"commentCount\":0,\"image\":{\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation#primaryimage\"},\"thumbnailUrl\":\"https:\/\/static.africa-press.net\/eswatini\/sites\/33\/2023\/12\/sm_1701915468.983045.jpg\",\"keywords\":[\"Africa Press\",\"Africa Press-Eswatini\",\"Eswatini\"],\"articleSection\":[\"all news\",\"files\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\",\"url\":\"https:\/\/www.africa-press.net\/eswatini\/all-news\/currency-manipulation\",\"name\":\"CURRENCY MANIPULATION - 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