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Global Exchange

Exchange Rates for Thursday 17th May 2012

19 May

German authorities ban short selling

German authorities took the unprecedent move to ban the short selling of bank and insurance stocks until March 31st 2011 yesterday. The move mimics the same steps taken by the US and UK authorities to try and prop up the equity markets in 2008 following the collapse of Lehman Brothers.
 
It is worth nothing that the steps taken by the US and UK in banning short selling had little effect and, if anything, increased market declines and volatility as investors and bailed out of the whole sector. The risk now is that the Germans will cause the same mayhem.
 
The ban is even more curious as the shares of the financial institutions involved have been relatively orderly over the past few weeks. It therefore creates a lot of uncertainty as to the reasons why they have decided to act now?
 
The market reaction was a boost to the "risk-off" trade with the US Dollar (seen as a safehaven by investors in volatile times) hitting a 14-month low against Sterling and a 4-year low against the Euro. The Australian dollar and New Zealand dollar lost ground as well, as Sterling benefitted against the antipodean pair of currencies as they fell against the US Dollar.

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Conceived with Ambition