Interest rates a soldier in the currency wars - the greenback rally triggered by the BoJ's latest move shows the dangers of QE for the US

Pendal Group

Pendal Group

Interest rates a soldier in the currency wars - the greenback rally triggered by the BoJ's latest move shows the dangers of QE for the US. There is substantial risk the success of QE programs occurring right now (perhaps Sweden, South Korea and very likely the European Central Bank) will drive the US$ higher. US companies earn up to 50% of their revenues offshore and will be severely affected by appreciation in the US$. How will the US fight back? Avoiding policy error will be on top of the minds of every central bank even contemplating hiking interest rates. Even now our cousins at the Reserve Bank of New Zealand have halted their own fairly well-developed hiking cycle while at the same time claiming the New Zealand dollar was well above fair value and therefore hurting the domestic economy. So what happens if the US is caught in a situation like New Zealand - a currency that is too high and nowhere to go with rates but down? Click here for more from Vimal Gor (VIEW LINK)


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