Goldman shrugs off $1B currency loss
(MoneyWatch) Goldman Sachs (GS) lost more than a billion dollars on a currency bet in the third quarter of this year and neither the company nor investors are particularly upset.
The foreign exchange options division of Goldman reported a loss for the period because of a failed bet on the value of the dollar versus the Japanese yen. Goldman thought the Federal Reserve was going to begin winding down its monetary-easing programs but the Fed’s surprise announcement about keeping the massive bond-buying program in place left Goldman with investing positions that, "absolutely got annihilated," Reuters reported, citing unnamed sources.
Although Goldman didn't announce the size of the loss at the time, regulatory filings with the Fed and the Securities and Exchange Commission showed the foreign exchange desk was the only trading area to report a loss for the quarter, according to Reuters. The $1.3 billion third quarter loss for the fixed-income, currency and commodities trading section was its worst showing since the financial crisis.
The nearly 50 percent loss for this trading section shocked investors, rivals and independent analysts because Goldman has long been known as one of the savviest traders on Wall Street. Observers were surprised the firm had held so much currency inventory at a time when those markets are particularly volatile.
Goldman did not respond to calls for comment today, but in a conference call on Oct. 17, Chief Financial Officer Harvey Schwartz said the weak currency numbers were the result of difficulties managing inventory. He also said the firm had reduced its currency trading exposure over the course of that quarter.
After last month’s conference call Goldman’s stock dropped two percent, but it has risen four percent since. It opened at 166 on Nov. 21 and was up nearly a point in midday trading.
