Last checked at 
By Anirban Nag and Patrick Graham
LONDON, July 1 (Reuters) - The almost-$9 billion fineslapped on BNP Paribas this week has got foreignexchange markets buzzing about how and when the French bank willprocess the payment and whether it will lead to sharp priceswings.
So far, little direct impact has been felt, especially inthe most liquid euro/dollar exchange rate. But traders andanalysts are poring over the details of case as closely as theyanalyse one-off flows related to cross-border mergers.
Steady accumulation of dollars from a European bank coulddepress the euro/dollar exchange rate, at least briefly,traders said.
Just over a month ago, penalties worth $2.5 billion imposedon Credit Suisse by U.S. authorities drove the dollarto a three-month high against the franc, several traderssaid. The payments went through the noon "fix" during Londontrading.
Central to the speculation about the BNP fine and how it mayaffect the exchange rate is when the amount needs to be paid,whether the bank raises the money through U.S. dollar bonds andif any of the amount set aside for the fine has been hedged.
Traders said with details on the fine becoming clear overthe past week, it was unlikely the bulk of the fine would behedged. And bankers said there was no indication so far that BNPParibas was sounding out investors for a dollar bond issue. Sucha bond would have minimal impact on exchange rates.
Some traders reckon that the lack of price action so farsuggests the bank, which is among the top 10 banks in the foreign exchange business, according to Euromoney, may haveworked off quietly.
But most admit that it is not clear enough yet to say thecoast is clear and the fine payment will have little impact.
Analysts at Investec reckoned the market may trade aroundthe speculation, at least for a while.
"The significance of this for FX markets is that althoughthe bank may have pre-bought a certain amount of dollar fromtheir euro holdings, the assumption is that there is likely tobe more euro sold and dollar purchases now that final figure isconfirmed," Investec told clients in a note Tuesday.
The plea agreement signed by BNP provides for it to pay thefine within 30 days.
BNP refused to comment on how the bank plans to make thepayment. It said in May it had already made provisions of 1.1billion euros ($1.5 bln) towards the fine.
BIG FLOWS
The bank is expected to sell bonds or some assets to helppay for the fine. It has a large liquidity buffer of about 100billion euros at the end of the first quarter - with half ofthat in dollars - figures that have remained about the same atthe end of the second quarter, senior officials have said.
Some senior dealers contacted by Reuters said it wasimpossible to detect any real impact in daily flows to date andit's likely these would be well disguised by a bank with globaltreasury operations anyhow.
"We have not seen any price action to indicate it, but myinclination would be to expect that they had hedged a lot ofthis already," said the head of spot G10 currency trading withone bank in London.
"BNP are a pretty sophisticated operation in general and itwould be a real surprise if they had not been planning for thisfor some time. They also run a pretty hefty U.S. dollar balancesheet and I would think they would be making use of that."
But big one-off flows unnerve spot dealers, who constantlyneed to be wary of outsize orders buffeting rates unexpectedly
Earlier this year, the repatriation of funds from Vodafone's $130 billion sale of its stake in the wireless unit ofVerizon in the United States drove the British poundhigher against the dollar.
And, as with the Credit Suisse fine fallout, much of thefocus will be on activity around the "fix".
The "fix" is a benchmark service in the foreign exchangemarket provided by banks. It is useful for buy-side investorslike large funds to value and benchmark their portfolios, sincea majority of main stock and bond index compliers use the ratesfor their calculations.
"One would assume if the payments have to made - convertingeuros to dollars - they would be through the fix as shareholdersdemand a certain degree of transparency," said a London-basedcurrency trader. (Additional reporting by Jemima Kelly; Editing by Larry King)
