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You could almost hear the ghost of LIBOR rattling its chains as news broke that investment banks are under investigation for possibly attempting to manipulate currency markets. An industry still smarting from what so far total $3.7 billion in fines for rigging the LIBOR rate must have collectively shivered in apprehension.
UBS AG, Deutsche Bank AG, Citigroup Inc., Barclays Plc, HSBC Holdings Plc, Royal Bank of Scotland Group Plc, JPMorgan Chase & Co. and Credit Suisse Group AG have all launched internal probes or received requests for information from regulators, according to the Financial Times, citing people familiar with the situation.
But experienced foreign exchange players are skeptical that the investment banks would have the muscle to rig prices in a $5.3 trillion-a-day market, the world's biggest, which even central banks can't control.
A focus for the investigations is the so-called "fixes" for currencies at 4 p.m. London time. These provide key benchmarks for exchange rates in an opaque market which is based not on an exchange but on myriad bilateral trades.
But, while "banging the close" has been detected in other asset classes, "banging the fix" in forex would be much more difficult, according to Robert Savage, chief strategist at FX Concepts LLC, which was once the largest currency hedge fund in the world but said in October it was closing its investment management operations.
Longstanding concerns by some investment clients that...