ANNUAL REPORT AND ACCOUNTS 2010 - Banif

1.4.2. retail and corporate marketAs the effects of the crisis spread, the inability of public policies to support economicactivity and a rise in financing costs led to reinforced policies to attract deposits, saleof non-strategic assets and an increase in highly liquid assets. The dispersed increasein risk premiums and the shortage of finance in the interbank markets conditionedinterest rates on the domestic retail markets and affected the solidity of banks’accounts. This scenario has led to deeper consideration as to the best way and time toadopt the new regulatory framework for banking. The banking business will proceedwith a higher than usual degree of unpredictability in a context of progressively lowerliquidity in the money and credit markets.1.4.3. money MARKETS and FOREIGN exchangeSIn 2010, the exchange markets once again showed high volatility of the dollar. Itsmaximum against the euro was 1.1923 and its minimum was 1.4513 and it ended theyear at 1.3384, down 8.3%. The Fed kept its refi-rate at an all-time low (0-0.25%) and theECB continued the reduction of this rate that it had begun in 2009 to the lowest ever(1%). The euro was particularly affected by the crisis in Europe associated with thesovereign debt markets and lower medium-term economic growth prospects as a resultof austerity policies introduced in the meantime. The yen appreciated considerablyagainst the dollar (12.2%) and reached 81.12 USD/JPY, once again becoming a refugecurrency at times of financial instability.EXCHANGE RATES1009590858075YEN/DOLLAR (EE)DOLLAR/EURO (ED)1.601.401.201.000.800.600.40SOURCE: BLOOMBERGAversion to risk in 2010 put a damper on the usual operation of the interbankmarkets, which had a negative effect on intra-community financial flows. TheEuribor rates rose during the year. The 3-month rate went up 31 bp to 1.01%, the6-month rate 23 bp to 1.227% and the 12-month rate to 26 bp to 1.507%. The centralbanks in the USA and EA maintained their extraordinary liquidity measures._24Banif – Banco de Investimento, SA – Annual Report and Accounts 2010