With the Fed, the Bank of England and recently the Bank of Japan engaging in massively expansionary monetary policy, central banks in South Africa, India, Australia, Poland, Korea, Denmark, Israel and elsewhere are lowering their interest rates too. They are doing this to stimulate growth and in some cases prevent their currencies from appreciating and hurting exports. To the extent it’s the latter, these actions blunt some of Bernanke’s objectives.
Tag Archives: Central banks
Currency Clash
When the Fed announces a third round of quantitative easing, expect unintended cross-currency consequences. Last time, the dollar fell against a host of currencies, but now central banks in many of those same countries will actively intervene to prevent their currencies from appreciating against the greenback. However, other countries seem unprepared to intervene such as Australia, New Zealand and South Korea. As a result, bet on their currencies rising.