The Maverick Treasurer - January 2017 (PDF Version)

The Maverick Treasurer – January 2017 Edition
Treasury Consulting LLP 1 | P a g e

Welcome Readers!!
Welcome to the January 2017 edition of “The Maverick Treasurer”. A Magazine which talks about
Treasury & Foreign Exchange Risk Management, Derivatives & Currency Trading, Interest Rates
Derivatives, Fixed Income Markets (Debt Markets, Money Markets, Capital Markets), Valuation of
Derivatives Instruments, Central Bank Policy Actions, Hedge Accounting (US GaaP, IFRS, IAS, Indian
GaaP, IND-AS), Guidance towards International Accounting Standards, Trading tips pertaining to
variety of assets classes covering both Onshore and Offshore Treasury Markets which in turn would
sink with Proprietary Trading Desk of “ Foreign Exchange Maverick Thinkers”
Editorial Desk of “ The Maverick Treasurer “ would always keep looking at issues which are very
sensitive in Foreign Exchange Markets and in turn would be having Financial Impact ( Balance Sheet
, Profit & Loss Account , Cash Flow Statements ) for both Exporters and Importers.
Editorial Desk of the Magazine would always try to present unseen faces of the Foreign Exchange
Markets and update Chief Executive Officers, Chief Financial Officers, Corporate Treasurers, Private
Sector Bankers, Public Sector Bankers, Financial Controllers, Officers of Banks Oversight Functions,
and Foreign Exchange Traders via Global presence of our Brand – “Foreign Exchange Maverick
Thinkers” having presence across the Globe (Covering all Electronic Platforms)
In Jan 2017 edition Editorial Desk would be covering important aspects of 6 International Currencies
like AUD/USD, USD/CNY, GBP/USD, USD/JPY, EUR/USD, and USD/INR. Editorial Desk would be
covering valuation of all 6 Currency Pairs till 1 Years period where by comparing covering Plain
Vanilla Forwards Contracts vs Options Derivatives Contracts for both Exporters and Importers using
Buy Put and Buy Call Contracts respectively.
At the same time “Financial Derivatives & Analytics “section of the Magazine would be covering
valuation of Derivatives Instruments for both Exporters as well as Importers. During Jan 2017
edition “Financial Derivatives & Analytics “would be targeting both Exporters and Importers
covering variety of derivatives which can be a part of their hedging program.
“ The Maverick Treasurer” also having exclusively Treasury Club on Pan India and Asia basis titled
“Mavericks Club” for all Chief Executive Officers, Chief Financial Officers, Corporate Treasurers,
Private Sector Bankers, Public Sector Bankers, Financial Controllers, Officers of Banks Oversight
By: - Rahul Magan
Chief Executive Officer, Treasury Consulting LLP
Country Director, International Institute of Certified Investigation Professionals, Inc. (IICFIP)
Country Director, Association of Certified Forensic Accounting Professionals (ACFAP)
Rahul.magan@treasuryconsulting.in , Info@treasuryconsulting.in
91-9899242978, Skype ~ Rahul5327, Twitter @ Rahulmagan8
www.treasuryconsulting.in

Circulation of the Magazine
During 2017 Treasury Consulting LLP Publication Desk would launch its flagship magazine
– “ The Maverick Treasurer “ on several prominent platforms like Flipkart, Snap deal ,
Quikr, EBay and many more.
The Maverick Treasurer
Joomag
Magzter
AMAZON
The Maverick Treasurer
TCMS
Readwhe
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Pocket
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The Maverick Treasurer (January 2017) – Table of Contents
Particulars Page No
Global Economic Review by Editorial Desk 5
Valuation of Currencies
Australian Dollar (AUD) 6
SDR Currency ( Chinese Yuan ) 7
Valuation of Risk Off Currency (EURO) 8
Euro Union Currencies - Great Britain Pound (GBP) 9
Future of Block Chain Technology - Banking 10
Demise of Turkish Lira (TRY) 12
USD – 2017 Bull Year 13
Volkswagen Emission Scandal 14
Commodities Call – Back to Basics 16
Chinese Yuan , Yen , $ 17
Forecast of Currencies ~Year 2017 ( Quarter on Quarter ) 19
Upcoming Trainings Programs of “ Treasury Consulting LLP “ 20
Profile of Rahul Magan 21
Profile of Treasury Consulting LLP 22
Treasury Consulting LLP – You Tube Channel 23

Global Economic Review by Editorial Desk
At Onset Treasury Consulting LLP Publishing Desk wishing you a very great New Year 2017. We
wish you a prosperous New Year. Have a great time.
In our view Year 2017 would turn out to be a volatile year where by USD would rule the show.
Year 2017 would be a USD Bull Year where by all USD directs like USD/INR, USD/PHP , USD/SGD,
USD/RON, USD/CZK and others would move up while all Dollar indirect or Global Directs like
GBP/USD, EUR/USD , AUD/USD, NZD would move down.
Publication Desk would see a huge bull in Dollar Trades where by USDX or Dollar Index might
touch 110 as well. Sitting today USDX is trading at 103 and moving up. The major beneficiary of
rise in USDX would be Japanese Yen whereby we expect would trade at 125 levels. Imagine a
Country who is doing Quantitative Easing since last 20 Years and sitting today both Central
Government as well as Central Bank doing large scale Monetization of National Debt amounting
JPY Trillions. Japanese Yen was all scheduled to trade at 95 levels while post 8th Nov 2016
proximity between Japan and Trump push this to 118 levels and our Publication Desk would see
this at 125 levels.
As regards Indian Rupee (INR) is concerned then we see high depreciating Indian Rupee to say
72 by Mar 2017. Impact of Demonetization, low growth in Global economy would surely shave off
at least 3% of the GDP in near term. Treasury Consulting would advise Exporters to start hedging
their Foreign Currency Receivables using Rolling Hedging Program while also using Options to
hedge their exposures. Importers are advised to cover their exposures at 67.80 levels using
rolling hedging programs. Publication Desk would advise both Exporters as well as Importers to
cover their Foreign Currency Receivables, Foreign Currency Payables using mix of Forwards,
Options, Options Payoffs and Currency Swaps.
Last but not the least we see Euro to touch parity in Feb 2017. As Europe is getting disintegrated
henceforth future is not so good for Euro. If Euro would touch parity which is the scene henceforth
in that sense all Companies having Euro as a Foreign Currency Receivable would surely lose.
Considering Euro outlook Treasury Consulting Publishing Desk would advise Organizations to
cover their exposures using Options, Options Strategies like Range Forwards (Exporters), Range
Forwards (Importers), Seagull (Exporters), Seagull (Importers), Call Spread and Put Spreads.
Advice from Editorial Desk: - Traders are advised to keep an absolute look at the volatility levels
in their Portfolio. Sitting today crosses are turning more volatile than straight Direct and Indirect
Pairs in the Foreign Exchange Markets. Central Banks left with either little or no fire power to
douse the fire of Global Recession which is round the corner so be careful mates!!
All the Best,
Rahul Magan
Founder & Chief Editor, “The Maverick Treasurer”
91-9899242978, Skype ~ Rahul5327, Twitter @Rahulmagan8

Commodity Currency – Australian Dollar (AUD)
As we understand that Australian Dollar is amongst Group of those Currencies having high
volatility. Commodities Currencies would be facing more volatility in near term as United States
would go with huge amount of Capex which would pump up Commodities. At the same time
Australian Dollar would face the same call which they are facing long time but no concrete reply
– AUD/USD or AUD/CNY or CNY/AUD?? I suggest time has come when Australian Dollar would
go with AUD/CNY as with this they would Reverse Dollarize their Balance Sheet and also would
continue to get the status of Direct Currency Pair.
In the near term Central Bank of Australia would face another call which is Call of Carry. Under
this Central Bank to decide whether to continue with same overnight rate or cut it. Reason is
pretty simple with Trump 10 Year United States Treasuries (UST) is trading at 2.50% which is
expected to touch 3% and then 3.5% which would surely put all Investment Carry Currencies in
dilemma.
Fall in the valuation of Commodities Currencies lead to impairments in the books of major
players. In our view longer tenor Impairment would rise and with the rise in impairment would
further put pressure on the valuation of Commodities Currencies.
Important Points to Ponder about Australian Dollar:-
1. Australian Dollar downward bias aligned with Stronger Dollar.
2. Editorial Desk predicts Australian Dollar trading at .70 levels by Mar 2017 and .68 by June
2017. If Aussie would touch .68 then it would be a blessings for USD exporters in Australia
and doom for USD importers in Australia.
3. We expect Australian GDP to grown by 3% during 2017 as some fuelling would help booming
up Australian Dollar GDP.
4. We all understand that June 2017 Brexit would start and with this all major UK banks would
start moving out of UK and this would surely impact amongst most volatile cross which is
GBP/AUD.
5. Aussie would soon decide whether to follow CNY Status who is now a part of SDR Basket or
continue with USD. Sitting today Australian Central Bank signed a Cross Currency
agreement with Chinese Central Bank PBOC.
6. On the Trade from China Trump relationship would surely impact Australian Dollar. In our
person opinion Australian Dollar would go with USD.
Advice for Exporters and Importers:-
Year 2017 would be very interesting year for Commodities Currencies. Editorial Desk expect a
great movement in both Australian Dollar, Canadian Dollar. We do see OIL trading at 75/Barrel
while Iron Ore would surely move up. Editorial Desk is suggesting to all Australian Exporters
Importers to have Quarterly Rolling Hedge Program in place and also start having Options in their
Portfolio which covers Australian Dollar Forwards, Options like Buy Put, Buy Call, Range
Forwards (Exporters), Range Forwards (Importers), Seagull (Exporters), Seagull (Importers),
Call Spread Bull, Call Spread Bear and Put Spreads.
Editorial Desk agree with the thoughts that best Hedging Composition would decide impact in
your P&L whether Dr or Cr??

SDR Currency – Chinese Yuan (RMB)
As we understand that China now 2nd largest economy of the world with the GDP size of over $ 13
Trillion having FX Reserves of $ 3.5 Trillion which is highest in the Asia Pacific region in fact would
be highest vs Tokyo. The best part of the China is $ 3.5 Trillion of FX Reserves and at the same
time having Positive Net International Investment Position (NIIP) of greater than $ 1 Trillion.
China also boasts of having highest Investments in UST as well which is United States Treasuries.
Important Points to Ponder about Chinese Yuan:-
1. Currently Chinese Yuan is trading at 6.9 vs USD which is very high vs past
2. People Bank of China (PBOC) which is Chinese Central Bank is losing control over the fixings
of Chinese Yuan as now Yuan is a SDR Currency.
3. Throughout 2016 Chinese Yuan depreciated and that too at the faster pace.
4. China is facing Outward Direct Investment (ODI) which effectively means investors are
taking funds out of China however at the same time China still enjoys the status of Global
Manufacturing base.
5. China – Trump relationships would be a great concern to watch and especially when Trump
would like to consider Tokyo as an Investment Partner.
6. Chinese Central Bank PBOC is considering strategic investment via its Sovereign Wealth
Fund (SWF) Chinese Investment Corporation to create Equity Position in best known
Companies across the Globe.
Chinese Yuan is now acting as a SDR Currency of the world and with the same Chinese Central
Bank PBOC would lose all control over fixing of Chinese Yuan. We all understand that Chinese
Yuan is acting as a Non Deliverable Currency Pair where by every day based upon some formula
Chinese Central Bank would fix the Currency Pair. The same fixing would be use to settle all Non-
Deliverable Contracts having CNY as a Currency Pair. Regarding CNY Options we are going to use
Tokyo Cut. Sitting today all Non-Deliverable Currencies across the Globe would get settle using
daily fixing by their Central Banks.
We recommend Traders to hedge Chinese Yuan using Options Contracts and that too using
Options Strategies like Range Forwards, Seagull, Call Spread, Put Spread, and Knock in Knock out
Options (KIKO) though the trend is very clear Chinese Yuan would depreciates during 2017.
The following is the currency forecast of Treasury Consulting LLP for 2017:-
Currency/ Time Period Q1’17 Q2’17 Q3’17 Q4’17
Chinese Yuan Fixing by PBOC 7.10 7.15 7.20 7.40
Taking an Out of the Money Forward (OTMF) would help you having save from the probable FX
losses on Non Deliverable Forwards Contracts having CNY as a Fixing Pair.

Valuation of a Risk off Currency – Euro
Euro is also known as most volatile Currency pair of the Globe especially when it is all scheduled
to trade at parity. Agree or disagree Year 2017 would be Year of USD, Chinese Yuan, Euro and
GBP. Treasury Consulting LLP is having of view that sooner or later Euro would disintegrate
where by all major European powers like Germany France would disintegrate with EU and floats
their own Currency like in the past. We also see that Banks would be facing deep mess in their
Assets Holdings specially PIIGS. As per the reports Italian Banks needs Euro 52 Billion to clean
their Books while sitting today Italian Govt just managed Euro 20 Billion.
Important Points to Ponder about Euro:-
1. Treasury Consulting Publication Desk see Euro trading in the range of 1.05 – 1.08 in next
few months although there is a big probability of reaching to 1.03 as well.
2. On previous occasions Euro was saved by NY Hedge Funds, Institutional Investors as there
was no concern about Brexit but now we doubt NY Hedge Funds, FII would save Euro as
London is slowly losing the status of world financial centre.
3. European Central Bank (ECB) is all set to do Quantitative Easing (QE) of Euro 1.7 Trillion
which would continue in near term. In our personal opinion ECB would continue with QE till
2019.
4. We do see Growth Rate of not more than 1% in the Euro Area and would see UK grow by less
than 1% in upcoming time. Reason is pretty clear which is Brexit.
5. Higher the Quantitative Easing lower would be the rates in Europe. Sitting today Europe is
amongst countries who do have negative interest rates like Japan, Tokyo and Swiss.
6. Treasury Consulting predicts deep negative Interest rates in Europe due to Quantitative
Easing (QE) and Brexit.
As all Traders understand that both Euro and GBP and their respective crosses termed as
Volatility Gauges. At the time of writing Euro was trading at 1.04 against Dollar henceforth we
would continue to hold our opinion of having Euro Parity till Jan 2017 however at the same time
we would like to suggest all Exporters, Importers to have Seagull like Structure in place to hedge
their Foreign Currency Receivables, Payables. We do advice to take Seagull (Exporters), Seagull
(Importers) having Strike Rates at OTMF.
Currency/ Time Period Q1’17 Q2’17 Q3’17 Q4’17
Euro 1 .98 .96 .96
Currencies 1M Implied Vols 3M Implied Vols 9M Implied Vols 1Y Implied Vols
EUR/CHF 6.1 % 7.5 % 7.5 % 8.6 %
GBP/EUR 13.3 % 12.5 % 14.2 % 13.3 %
EUR/USD 11.8 % 11.0 % 11.7 % 11.7 %
Implied Volatility of well-known Euro Crosses.

European Union Currencies – Great Britain Pound (GBP)
As we understand that UK is facing the biggest question which is whether to continue with
European Union or exit?? However at the same time Growth prospects of GBP also not sounding
very good. As a Trader we can certainly see the same on valuation of Currency as well as volatility
levels in our portfolio.
There was the time when GBP was trading over 1.61 levels which effectively means 1 GBP was
equal to 1.61 $ however over the period many issues somewhat relates to Global headwinds till
Brexit took GBP to 1.22 levels or probably lower as the time would come.
Important Points to Ponder about Great Britain Pound:-
1. The near term impact on the Growth elsewhere in the EU seems relatively clear.
Heightened uncertainty after an exit vote would weigh on sentiment and spending in UK,
and add a risk premium to UK assets. As a consequence Sterling would fall which is
happening and may trade at 1.35 levels as well.
2. These developments would have negative impact for EU. As per estimates 10% decline in
Sterling means Euro would appreciated by 1.3% on trade weighted terms.
3. ECB (European Central Bank) first response statement is likely to be a statement that it is
closely monitoring the impact of the vote on financial markets and its implications on
Growth and Inflation.
4. It would not take long for ECB to intervene in stressed assets markets with variety of
liquidity provisions targeting Banks and Assets purchases however at the same time ECB
to look at its balance sheet as well before making any decision.
5. The medium term impact of Brexit is very uncertain. Much will depend on relationship
between UK and EU. Regardless of what the final relationship looks like the intervening
Month of uncertainty during the negotiations would surely have an impact on trade flows.
6. The UK overall deficit on the trade with rest of the EU is well known as it is a fact that net
migration flows have tended to see significant inflow in UK economy.
7. The UK openness and history as a financial centre has contributed to an enlarged balance
sheet relative to the flows however as UK exits would have an impact on the UK as a global
financial centre.
Advice for Exporters and Importers: - Exporters as well as Importers are advised to hedge their
Receivables as well as payables using mix of Forwards, Options and Options Structures. Traders
are advised to keep Implied Vols levels in mind while placing trades in GBP or GBP crosses.
Volatility Gauges 1M Implied Vols 3M Implied Vols 9M Implied Vols 1Y Implied Vols
EUR/GBP 12.8 % 11.8% 13.2% 12.4%
GBP/AUD 13.2% 13.2% 15.3% 14.7%
GBP/JPY 19.5% 17.7% 18.7% 17.2%
See Volatility levels in GBP during talks of Brexit. Don’t under estimate
potential impact of Brexit on GBP.

Future of Block Chain Technology – Banking
The future of finance could be dominated by block chain technologies. A traceable
global currency complete with an efficient infrastructure will not only result in
massive cost reduction for all market participants, it will change global banking.
Bitcoin will do for payments what email did for communication.
Block chain, cognitive computing and cloud are some of the technologies that will
shape the finance industry the most in the digital age, banking and technology chief
executives told a financial conference on Monday.
IBM Corp's President and Chief Executive Ginni Rometty said that cognitive
computing, or computer systems that can mimic the way the human brain works,
will be the "ultimate way" finance firms will become more competitive in the
future.
What is changing?
Block chain will be adopted by central banks and cryptographically secured
currencies will become widely used.
NASDAQ will launch block chain-enabled digital ledger technology that will
be used to expand and enhance the equity management capabilities offered
by its Nasdaq Private Market platform.
The settlement of currency, equity and fixed income trades almost
instantaneously through permissioned distributed ledgers creates a
significant opportunity for banks to drive efficiency and potentially create
new asset classes.
Control
New technologies such as block chain have the potential to reduce cyber
risks by offering identity authentication through a visible ledger.
There is no reason why requirements for numbering, maintaining and
indexing records and communicating information provided in records could
not be met through an electronic ledger system.
Car rental agencies could use smart contracts that automatically allow
rentals when payments received and insurance information is confirmed
through a block chain record.
A refrigerator equipped with sensors and connected to the Internet could
use block chain to manage automated interactions with the external world-
anything from ordering and paying for food to arranging for its own
software upgrades and tracking its warranty.
Small businesses could use block chain to create trusted trading platforms
among themselves.
Block chain could potentially help bring robustness and transparency to the
post-trade environment.
New technologies such as block chain have the potential to reduce cyber
risks by offering identity authentication through a visible ledger.
A bank could pay the supplier instantly over the Internet.
Block chain technology will alter timing on risk.

Banks
Block chain will be adopted by central banks and cryptographically secured
currencies will become widely used.
Block chain could replace central banks.
Real risks remain for banks that choose to get involved with cryptocurrency
firms.
Block chain technology could reduce the UBS's infrastructure costs in cross-
border payments, securities trading and regulatory compliance by as much
as $20 billion a year by 2022.
The number of applications within and outside the banks could be reduced
as the Block chain transaction contains all relevant information for the
successful transfer of assets and/or related contracts.
Deutsche bank's economist sees block chain as a threat because of the lack
of the IT infrastructure to support the technology involved.
Ethereum is much more general purpose than bitcoin and could be useful
for banks.
The future of finance in many nations could be dominated by Bitcoin and
cryptocurrencies.
A private block chain run by banks could end up as just "another cartel" and
function as poorly as the payments consortium.
Banks could become the "custodians of cryptographic keys".
The block chain could save lenders up to $20 billion annually in settlement.
Block chain technology could be used to bypass today's centralized financial
infrastructure entirely.
By: - Rahul Magan, Chief Executive Officer, Treasury Consulting LLP

Demise of Turkish Lira (USD/TRY)
The lira dropped through 3.50 per dollar, extending its slump this year to 17
percent, the most in emerging markets behind the Argentine and Mexican pesos.
The decline is adding to pressure on the nation’s central bank to step in to stem
losses, even after its surprise interest-rate increase last week failed to have a
meaningful impact on the lira’s drop.
Turkey is at the moment the most exposed country to tail risks, both domestically
and externally," said Cristian Maggio, head of emerging-market research at TD
Securities in London, who cited a combination of weakening economic indicators
and a “grave" political situation. “The market has the upper hand because it knows
that the bank cannot defend the currency other than hiking," a move that has been
opposed by politicians including President Recep Tayyip Erdogan.
The lira fell as much as 2 percent to 3.5063 per dollar on Thursday. It also fell to a
record 3.7184 against the euro.
The lira has plummeted after Donald Trump’s victory sent U.S. yields soaring on
speculation inflation will rise. Turkey’s economy relies on foreign cash to finance
a current account deficit that is set to widen to almost 5 percent of output next year.
The risk that higher oil prices after OPEC’s decision to cut output Wednesday will
increase the country’s import bill is also piling pressure on the currency.
“It’s a terrible and fraught situation, but if the selloff continues at this pace, there
will be absolutely no choice for the central bank except to intervene,” Phoenix
Kalen, a strategist at Societe Generale SA in London said by e-mail, adding that the
selloff today has been compounded by a lack of liquidity.
A host of domestic factors including a crackdown against Erdogan’s political
opponents after a failed coup in July and the country’s involvement into the
Syrian civil war has exacerbated investor concerns. Credit default swaps on the
nation’s debt climbed 16 basis points to 306, the highest since February.
“If USDTRY goes high enough there will be no choice” for the central bank to raise
interest rates, Henrik Gullberg, a London-based strategist at Nomura International
Plc said by e-mail. “Where high enough is what we are all finding out right now.”
The chief economy adviser to Turkish President Recep Tayyip Erdogan, Cemil
Ertem, told Anadolu Agency that there was a campaign underway to depreciate the
lira in a rapid manner.
“The forex demand is very shallow, highly speculative and originates from abroad.
This is happening when the Turkish parliament has started to debate the
constitutional amendment. We have seen a campaign in a bid to depreciate the lira
in a rapid manner. This is not a conspiracy theory but an obvious fact,” he said.
Best @ Rahul Magan, Chief Executive, Treasury Consulting LLP

Year 2017 – USD Bull Year
There is a lot of debate whether there is a US dollar bull market or bear market.
Many believe, because of the monetary easing policies of the Fed, that the dollar
should be declining in value. The US currency is acting very strongly recently. It has
bullish energy. The key question we try to answer is whether the US dollar is in a
long term bull market.
Most commodities will suffer, without any doubt.
Gold and silver will lose value.
Stock markets can go both directions, it really will depend on intermarket
dynamics. In other words, stocks will follow the primary trend. If the US
dollar will be so strong that it will create panic, similar to what happened in
2015, then stocks will suffer. However, if the US dollar bull market will be
‘soft’, then we would not exclude strength in US stocks. In such a scenario,
emerging markets will likely be ‘contained’.
Global currencies will feel (serious) pressure.
CFTC data covering the New Year week show investors slowly rebuilding
overall net USD long positons, having run down exposure somewhat through
mid-December. Overall, speculative accounts have added more than USD3bn
to net USD longs since the December 16th data, taking the total net bull bet
to USD27.7bn in the latest week.
Positioning changes were, for the most part relatively
minor. However, bearish GBP sentiment increased more obviously as spec
accounts lift net GBP shorts by 7.7k contracts (or USD572mn) in the week.
Net CHF shorts increased by USD408mn, reflecting broader USD bullishness.
Net EUR shorts were raised modestly while net JPY shorts were trimmed
very slightly as shorts covered.
 Net CAD positioning shows an interesting divergence in positioning as both
gross longs and shorts have been rising in the past few weeks leaving
aggregate positioning near flat still. CAD volatility over the holiday period
likely means that a significant break above or below the CAD’s recent range
may be needed to force a decision on who is right.
 Net short AUD and NZD positions were lifted slightly this week but net AUD
positioning remains near flat and the NZD remains seemingly immune to
increasing bearish sentiment.

Volkswagen Emission Scandal
Six high-level Volkswagen employees have been indicted by a grand jury in the
company's emissions cheating scandal, as the company admitted wrongdoing and
agreed to pay a record $4.3 billion penalty.
In announcing the federal indictments and plea deal Wednesday in Washington,
the Justice Department detailed an elaborate and wide-ranging scheme to commit
fraud and then cover it up. At least 40 VW employees were involved in destroying
evidence, the government said. The penalty against the company is the largest ever
levied by the government against an automaker, eclipsing the $1.2 billion fine
against Toyota in 2014 over safety issues related to unintended acceleration.
VW installed software into diesel engines on nearly 600,000 vehicles in the U.S. that
allowed the engines to turn on pollution controls during government tests and
switch them off in real-world driving. The software, called a "defeat device"
because it defeated the emissions controls, improved engine performance but
spewed out harmful nitrogen oxide at up to 40 times above the legal limit.
U.S. regulators confronted VW employees about the use of the software following
tests conducted by university researchers that showed differences in testing and
real-world emissions. Volkswagen at first denied the use of the defeat device, but
finally admitted to it in September of that year. Even after that admission, the
government said, company employees were busy deleting computer files and other
evidence.
At a press conference Wednesday, Attorney General Loretta Lynch said
"Volkswagen obfuscated, they denied and they ultimately lied." The German
company pleaded guilty to conspiracy, obstruction of justice and importing
vehicles by using false statements in a plea deal. It also requires VW to cooperate
in a continuing probe that could lead to the arrest of more employees.
Government documents accuse six VW supervisors of lying to environmental
regulators or destroying computer files containing evidence.
In one case, one of the six engine development supervisors asked an assistant to
search another supervisor's office for a computer hard drive that contained emails
between them. Once the hard drive was found, another assistant was asked to
throw it away.
According to the plea agreement, the supervisors and other employees agreed to
deceive the Environmental Protection Agency and other regulators about diesel
emissions starting in May 2006, when they realized the engines wouldn't meet
emissions standards that were going into effect in 2007.
Under the direction of supervisors, VW employees designed engines with "defeat
device" software that would reduce emissions only when the vehicle was
undergoing a standard U.S. emissions test. They borrowed the idea from VW's
luxury division, Audi, which was developing different engines with similar
software.

In November 2006, some employees raised objections to the defeat device to the
head of VW brand engine development. That official directed the employees to
continue and warned them "not to get caught."
In 2014, VW employees learned about a West Virginia University study that
identified emissions discrepancies in VWs. Three of the supervisors and other
employees decided not to disclose the defeat device to U.S. regulators, despite
increasing questions from the EPA and the California Air Resources Board.
On Aug. 19, 2015, a VW employee ignored instructions from supervisors and told
U.S. regulators about the defeat devices. A supervisor confirmed the devices the
following month.
VW also has agreed to the appointment of an independent monitor to oversee
compliance and control measures for three years.
Volkswagen previously reached a $15 billion civil settlement with environmental
authorities and car owners in the U.S. under which it agreed to buy back up to
500,000 vehicles. The company also faces an investor lawsuit and criminal probe
in Germany. In all, some 11 million vehicles worldwide were equipped with the
software.

Commodities Call – Back to Basics
Escalating supply side issues have seen base metal prices start the year with a bang.
We believe the risk of increased disruptions in the copper market in 2017 has risen
considerably, with the market only partially factoring in the probability of
disruptions. Over 14% of the world’s supply is under threat from a strike action in
Chile this year. The early signs aren’t great, with wage negotiations at Escondida
already breaking down. Compounding this is the threat of concentrate exports
from Indonesia being halted this week.
The signs of tightness in zinc are also increasing. Treatment charges continue to
fall, forcing the closure of smelters in China. Any delay to the restart of 500ktpy of
capacity that Glencore closed last year could also exacerbate the tightness in zinc
and send prices higher.
In addition, a slightly weaker USD and continued exuberance about global demand
has also supported sentiment. In the short term, the implications of a Trump
presidency have yet to be realised. However, all things considered, we expect base
metal prices to remain well supported in the coming weeks. OPEC output. Reports
are emerging that OPEC signatories to the production cut agreement have already
commenced reducing output. However, the market will have to be patient as OPEC
won’t publish January data until 13 February. There is a possibility that the January
report (released on 18 January) may contain some commentary. Meanwhile, the
monitoring committee meets in Vienna on 21 January.

Chinese Yuan, Yen and USD
The dollar index retreated from its 14-year peak on Thursday following the biggest
two-day gain in the Chinese Yuan, on record. Further, mixed signals from the US
employment data failed to reverse this decline with the dollar index standing at
101.39- a three weak low. Markets braced for further volatility as they awaited the US
non-farm payroll data - due later in the day today.
The dollar also lost support from treasury yields as investors grew risk averse given
the uncertainties surrounding the incoming Trump administration. The 10-year
Treasury note fell to 2.353, compared to the peak of 2.640 reached last month.
The dollar fell by close to 1.8% versus the yen which was at 115.15 and the EUR/USD
pair was at 1.068 on Thursday.
Falling dollar/Yuan pair, pushes dollar down against other major currencies
In Hong Kong overnight borrowing cost rose to 38% from 17% on Thursday as the
Chinese central bank tightened liquidity by asking the nation's bank to withhold funds
from other banks. Also growth in Chinese service sector for December rose to 17-
month high, with both these events supporting the rise in the yuan. As a result, the
dollar fell against both the EUR and Yen on Thursday. Further the dollar index against
a basket of major currencies moderated to 101.39 – it’s lowest since 14 Dec.
Mixed signals from the US labour market
U.S jobless claims fell to a 43-week low last week signalling further tightening
of the labour market. Initial claims dropped by 28,000 to a seasonally adjusted
235,000. The four week moving average claims - a better measure of labour
market trends - fell 5750 to 256,750. Claims have now been below 300,000 a
threshold for healthy labour market for 96 consecutive weeks.
Tightening in the labour market encouraged the FED to raise rates last month
while the minutes of the meeting released on Wednesday signalled that the
pace of future hikes will be determined by the developments in the labour
market and fiscal policy.
However, ADP payrolls data showed that employment gains were moderate in
December. The U.S. non-farm private employment as depicted by the ADP
national employment report rose less than expected in December by 153,000
- sharply down from November’s 215,000, which was revised down slightly
from 216,000 and below consensus forecasts for an increase of 170,000.
Even though there isn’t a very close correlation between the ADP and non-
farm payrolls (due later today), it does give a directional guidance on private
sector hiring. This implies that today’s more comprehensive labour market
report may show some disappointment as well.

In other data releases, ISM US non- manufacturing index stood at 57.2 in
December as compared to an expectation of 56.6. The employment sub index
moderated by 4.4 ppt to 53.8 in December as compared to the previous month.
U.K. economy ended 2016 on a strong note
UK’s services-sector PMI grew at the fastest rate since July 2015 to 56.2 in
December from 55.2 a month earlier. While the pound depreciation helped in
boosting exports, demand remained healthy at home as well.
Previously, similar gauges of activity for manufacturing and construction also
recorded gains in December, suggesting that the British economy finished off
the 4Q of 2016 on a strong note.
While the incoming data on the UK economy has surprised on the upside and
defied expectations of a post Brexit slowdown, investors seem concerned
about the accelerating inflation and uncertainty over UK’s ties with the EU in
the future. The GBP/USD pair closed at 1.2418 on Thursday.

Forecast of Currencies ~ Editorial Desk
Currencies Q1’17 (EOP) Q2’17 (EOP) Q3’17 (EOP) Q4’17 (EOP)
AUD/USD .7200 .7200 .7100 .7000
NZD/USD .6800 .6800 .6600 .6400
USD/CAD 1.3300 1.3500 1.3600 1.4000
EUR/USD 1 .9800 .9500 .9200
GBP/USD 1.2600 1.2200 1.1800 1.1600
USD/JPY 125.00 120.00 118.00 116.00
USD/INR 68.5000 69.0000 69.5000 69.5000
Notes: Forecasts are done using respective models created by Editorial Desk covering Direct,
Indirects and Crosses.
Notes: - EOP stands End of Period
View of Editorial Desk: - FX Markets would be facing huge volatility during 2017. In that regards
Exporters are advised to hedge their forecasted receivables using Options Contracts like Range
Forwards (Exporters), Seagull (Exporters) and Buy Put Contracts.
It is always advisable to Corporate Treasurers to hedge their exposures using Seagull Contracts
when exchange pairs are getting highly volatile. Seagull contracts are nothing but the sum of Buy
Call + Range Forwards (Exporters) or Buy Put + Call Spread.
Risk Management Policies (RMP):-
We also need to understand that Risk Management Policy (RMP) of the Hedge Funds, Banks,
Trading Desks, and Corporate Treasuries plays a very important role in the Trading strategies.
As we understand that world is almost on the verge of big Neon Swan event henceforth Hedge
Funds Managers, Bankers, Traders and Corporate Treasurers need to start changing their
Hedging Strategies and start taking Options, Exotic Derivatives as to hedge their Receivables and
Payables covering Shorter and Longer tenors.
You are most welcome to connect with Treasury Consulting LLP in case you are having any
requirement covering FX markets. Our Foreign Exchange (FX) Consulting Desk advising
Corporates, Banks, Financial Institutions, Hedge Funds covering variety of Derivatives exposures.

Treasury Consulting LLP – Online Trainings Academy
Treasury Consulting LLP is launching various Trainings programs at Asia Pacific level covering
the following:-
 Foreign Exchange & Derivatives Strategies – Beginner Program
 Foreign Exchange & Derivatives Strategies – Advanced Program
 Treasury Risk Management – Beginner Program
 Treasury Risk Management – Advanced Program
 Currency Derivatives
 Interest Rate Derivatives
 International Financial Reporting Standard (IFRS)
 Basel III
 Anti-Money Laundering
 ISO Certifications – ISO 31000 , ISO 37001
 Technical Analysis – Beginner Program
 Technical Analysis – Advanced Program
 Governance Risk & Compliance (GRC) – SOX, COSO
 Information Technology Audits (IT Audits) – COBIT , SSAE 16
 Analytics
 Financial Analytics
 Cash Flow Analytics
 Risk Based Modelling Analytics
 Basel III Analytics
 Treasury Analytics
 Anti-Money Laundering (AML) Analytics
 Business Analytics
 Data Analytics
 Working Capital Management
 Capital Restructuring
Online Trainings Academy offers Online Courses which are weekend based and do
be delivered using webinar, webcast, Skype Conferencing. We would be sharing
Presentations, Case Studies, Excel Case Scenarios and Complementary Skype
Conferencing post completion of the Course.
You are most welcome to connect with us at 91-9899242978 (Handheld) , Skype
Connect ~ Rahul5327 , Twitter @ Rahulmagan8 ,
Rahul.magan@treasuryconsulting.in , Info@treasuryconsulting.in or visit our
website – www.treasuryconsulting.in

Rahul Magan Profile:-
Rahul served as a Corporate Treasurer of United States, India based Information Technology
Enabled Services (ITES), Information Technology (IT) Companies – EXL Service Holdings, Inc. and
HCL Technologies Limited respectively. As a Corporate Treasurer handled key Treasury Desks
like Treasury Front Office Desk, Treasury Middle Office Desk, Treasury CFO Desk and Treasury
Research Desks.
Role as a Corporate Treasurer covers the following:-
 Onshore & Offshore Treasury Risk Management
 Foreign Exchange Hedging
 Cash Flow Hedging
 Fair Value Hedging / Balance Sheet Hedging
 Net Investment Hedging
 Foreign Exchange Risk Management
 Derivatives Trading, Currency Trading ( Exchange Traded Markets )
 Fixed Income Markets (Money Markets, Debt Markets, Capital Markets)
 Treasury Wealth Management (All Assets Classes in Financial Markets) ##
 Trade Finance (Domestic , International , Digital Trade Finance)
 Treasury Accounting (IFRS, US GaaP, IAS (International Accounting Standards),
Indian GaaP, IND-AS)
 Global Cash Management (Cash Flow Forecasting, Cash Reporting’s)
 Management Reporting's ( CEO Deck, CFO Deck , Investor Deck , Board Deck)
 Respected roles as a Corporate Treasurer
Now Rahul is serving as a Chief Executive Officer (CEO) of Treasury Consulting LLP which is a
Limited Liability Partnership (LLP) firm incorporated in India having multiple Business streams.
Business Streams of Treasury Consulting LLP:-
 Trainings Domain
 Publication Domain
 Treasury Consulting – Knowledge Commerce
 Treasury Consulting – Analytics Desk
 Treasury Consulting – Foreign Exchange (FX) Consulting Desk
 B- Engagement
 Treasury Consulting – Financial Technologies (Fintech)
 Virtual Chief Financial Officer (CFO) Services
 Virtual Auditor
 Treasury Consulting – Asia Frauds Chapter
 Treasury Consulting Club – “ The Mavericks “
 Treasury Consulting – Merchandise Store
Sitting today Treasury Consulting is serving clients across Asia Pacific level and also having 8
International Collaborations in place covering Asia, Africa, New York, Australia, Singapore, Hong
Kong, Tokyo and Indian Markets.
You are most welcome to connect with us at 91-9899242978 (Handheld), Skype ~ Rahul5327,
Twitter @ Rahulmagan8, Rahul.magan@treasuryconsulting.in, Info@treasuryconsulting.in,
Treasuryconsultingllp@gmail.com or visit our website – www.treasuryconsulting.in

YOU Tube Channel – “Foreign Exchange Maverick Thinkers “
Treasury Consulting LLP owns You Tube Channel – “Foreign Exchange Maverick Traders “having
more than 275 videos covering diversified topics. Sitting today our You Tube Channel is having
over 275 videos, 1700 Subscribers, 250 K Reviews, 5 Million Minutes watched, 5000 Likes, 8000
Comments, 5000 Playlists.
To join our You Tube Channel simply open You Tube and type “ Rahul Magan “ and You Tube
would takes you to our Channel having 275 Technical Videos.
We are planning to cover 300 Videos by Dec 2016, 450 by Mar 2017, 600 by June 2017 and 900
by Dec 2017.
Foreign Exchange Risk Management
Treasury Risk Management
Fixing Indexes
( Interest Rates , Non Interest Rates Fixings )
Accounting Standards
( IFRS, US GaaP, IND-AS, Indian - GaaP )
Derivatives Instruments
( Plain Vanilla, Exotic Derivatives )
Fixed Income Markets
Business Valuation
Enterprise Risk Management (ERM)
Investment Banking
Interest Rate Derivatives

Treasury Consulting Club - Launch of Maverick Club
Treasury Consulting LLP owns a Club - “The Mavericks “across all segments in Industry. The
purpose of the Club is to sync people with practical world. Club would be charging Quarterly fees
of Rs 2000 where by Club would be offering following unique facilities:-
Update on Foreign Exchange Markets
SMS covering tips on Foreign Exchange Markets
Weekly email covering all important developments in Currency & Derivatives Markets
Subscription of the Magazine “The Maverick Treasurer “along with CD of the Magazine
which would cover all aspects in Video formats.
Updates happening in Law section like Accounting Laws as well as non-Accounting Laws.
Accounting Laws covering the following :-
IFRS
US GaaP
IAS ( International Accounting Standard )
IND-AS, Indian GaaP )
Companies Act 2013 – Internal Financial Controls
Internal Risk Reporting Frameworks
Sarbanes Oxley Act , Unites States
COSO Risk Management Framework
Quarterly Conference, workshop on agreed topics amongst all members.
Members are welcome Editorial Desk regarding membership of “Maverick Club” by writing to
us at 91-9899242978 (Handheld), Skype ~ Rahul5327, Twitter @ Rahulmagan8,
Rahul.magan@treasuryconsulting.in, Info@treasuryconsulting.in or
Treasuryconsultingllp@gmail.com or visit our website – www.treasuryconsulting.in
Best,
Rahul Magan
Country Director, International Institute of Certified Forensics Investigation Professionals Inc.
Country Director, Association of Certified Forensics Accounting Professionals
91-9899242978, Skype Connect ~ Rahul5327, Twitter @ Rahulmagan8

The Maverick Treasurer - January 2017 (PDF Version)

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