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Except for you.Most important warning? Let me guess - don't use leverage?
Financial institutions that dominate the $9.6 trillion currency market should hold the necessary liquidity and capital buffers and run enhanced stress tests to prevent disruptions to the financial system, according to an International Monetary Fund report released on Tuesday.
"Although stress testing and systemic risk monitoring have advanced, the role of FX markets as a conduit for risk transmission and cross-border spillovers remains underappreciated," the IMF said in one of the chapters of its semi-annual Global Financial Stability Report.
"Enhancing FX liquidity stress tests is essential to assess the sectoral resilience to funding shocks," according to the IMF.
Global banks have significant dollar exposure in their balance sheets, making them vulnerable to potential funding shocks. The increasing involvement of non-bank financial institutions and growing trade in derivatives "may also raise the global FX market’s vulnerability to adverse shocks," the IMF said.
Stress in the FX market "can spill over to other asset classes, tightening financial conditions and posing risks to macro financial stability—especially in countries with significant currency mismatches and fiscal vulnerabilities," the IMF added.
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I believe it means LGD physical is scarce and we are close to realizing a silversqueeze.
What is the EFP
Silver Breaks $50 (& $51 Too) As London's Getting Squeezed!
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