Introduction 1. Financial benchmarks, used as reference for pricing, valuation and settlement of financial instruments, are a key driver of price integrity of financial markets. From deciding the interest rate on a retail loan to determining the pay-off in a complex derivative, financial benchmarks are ubiquitous and deeply embedded in financial systems. By promoting standardisation, they facilitate liquidity in markets thereby lowering transactions costs.
A major part of international lendings and borrowings is at fairly short term. And they quite often tend to follow a self-reinforcing herd instinct in periods both of euphoria and of scepticism. Both factors, any domestic weaknesses and the properties of the international financial markets, may cause a potential for a reversal in sentiment for a currency to build up.