Currency talk: Can the Bank of Japan regain control of the yen?
ANZ's Sam Tuck and NBR's Jason Walls discuss the big movers and shakers in the currency markets. With special feature audio.
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Hawke’s Bay
It is one of the most thought-provoking issues facing currency markets at the moment – why does the Japanese yen continue to strengthen as its interest rates go negative?
In March, the Bank of Japan (BoJ) maintained its negative interest rates highlighting the economy was still fighting deflation and a sinking economy.
The minutes of the BoJ’s March meeting (released last week) are more about what the board members didn’t say, rather than what they did, ANZ FX strategist Sam Tuck says.
“[The bank] continued to say further policy easing would be possible but in the last meeting we saw one of the biggest one-day movements because it wasn’t talking about more easing.”
He says negative rates and quantitative easing don’t seem to be working and have actually had counter intuitive reactions from the currency markets.
“As rates have gone negative, the currency has strengthened.
“The question dominating currency markets is: Can the Bank of Japan regain control of the yen?”
He says it could be only a matter of time until the Japanese try to stimulate its economy by increasing government spending.
“Reserve Bank of Australia governor Glenn Stevens had delivered a speech on exactly this topic in New York before cutting Aussie rates last week.”
The cut rates to 1.75% last week, down from 2% citing low expected inflation.
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Tue, 10 May 2016
Tue, 10 May 2016
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Currency talk: Can the Bank of Japan regain control of the yen?
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