Tags: DOJ | foreign exchange | bank | currency

WSJ: Govt Continues Probes of Banks' Currency Operations

By    |   Wednesday, 14 January 2015 01:44 PM

It's the gift that keeps on giving, even though it's a gift that financial institutions don't want.

The government continues to investigate the foreign exchange activities of banks and brokerage firms to determine whether they break the rules, gaining unfair advantages and manipulating markets.

The Justice Department is looking at whether bank employees alerted hedge-fund clients ahead of time to big currency trades made by the banks that would probably influence currency values, knowledgeable sources tell The Wall Street Journal.

And the Department of Justice (DOJ) is probing banks' "spoofing" activity, in which traders submit fake orders to affect currency values or deceive clients or competitors.

JPMorgan Chase and Citigroup have recently dumped or suspended foreign exchange professionals, according to The Journal. And brokerage firm, Tullett Prebon has begun an internal investigation of its currency practices, a knowledgeable source tell the paper.

The DOJ investigations are separate from ones that were settled last year. In those probes, six banks agreed to pay $4.3 billion to the Commodities Futures Trading Commission, the Office of the Comptroller of the Currency, the U.K.'s Financial Conduct Authority and the Swiss Financial Market Authority (FINMA) to resolve allegations of manipulation of, and for aiding and abetting other banks' attempts to manipulate, global foreign exchange benchmark rates to benefit the positions of certain traders.

Many experts are concerned about a currency war, as nations around the globe devalue their currencies against the dollar to boost exports. The greenback has hit multi-year highs against many currencies in recent weeks.

"I think a global currency war . . . and a rising bull market in the U.S. dollar are the big macroeconomic drivers not just for 2015 but for the next four to five years," financial author John Mauldin, president of Millennium Wave Advisors, writes in an article for Business Insider.

"I think all future economic outcomes pivot along with these two major forces."

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It's the gift that keeps on giving, even though it's a gift that financial institutions don't want.
DOJ, foreign exchange, bank, currency
Wednesday, 14 January 2015 01:44 PM
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