11 Feb 2015
Risk exists for a USD strength to slow against EUR and JPY – Rabobank
FXStreet (Barcelona) - According to Jane Foley, Senior Currency Strategist at Rabobank, risk exists that US policy makers might push back against USD strength this year, which might slow the pace of potential moves in USD/JPY and EUR/USD.
Key Quotes
“This morning BoJ Governor Kuroda confirmed that there was no direct criticism of Japan’s accommodative monetary policies at the G20 meeting. He stated that he “felt it is well understood internationally that Japan will make positive contributions not only to its own economy but to the global economy if the nation ends deflation and achieves 2% price stability through quantitative and qualitative monetary easing”.”
“The weaker tone of the yen this morning suggests that some investors sees this apparent lack of criticism of Japan as removing a barrier to further BoJ stimulus this year.”
“Applying Kuroda’s reasoning to the Eurozone, it is possible that some policy-makers are willing to accept a weaker EUR on the grounds that it also bring net benefits to world growth too, even though it is clear that it has been creating problems for central banks such as the SNB and the DNB.”
“That said, while both the BoJ and the ECB have undermined their respective currencies through extraordinary policy action, we have often argued that USD strength has facilitated the drop in the effective exchange rates of Japan and the Eurozone.”
“Even though strengthening growth in the US has paved the way for USD appreciation, there is still a risk that US policy makers could push back against USD strength this year and this could slow the pace of potential moves in USD/JPY and EUR/USD in the months ahead.”
Key Quotes
“This morning BoJ Governor Kuroda confirmed that there was no direct criticism of Japan’s accommodative monetary policies at the G20 meeting. He stated that he “felt it is well understood internationally that Japan will make positive contributions not only to its own economy but to the global economy if the nation ends deflation and achieves 2% price stability through quantitative and qualitative monetary easing”.”
“The weaker tone of the yen this morning suggests that some investors sees this apparent lack of criticism of Japan as removing a barrier to further BoJ stimulus this year.”
“Applying Kuroda’s reasoning to the Eurozone, it is possible that some policy-makers are willing to accept a weaker EUR on the grounds that it also bring net benefits to world growth too, even though it is clear that it has been creating problems for central banks such as the SNB and the DNB.”
“That said, while both the BoJ and the ECB have undermined their respective currencies through extraordinary policy action, we have often argued that USD strength has facilitated the drop in the effective exchange rates of Japan and the Eurozone.”
“Even though strengthening growth in the US has paved the way for USD appreciation, there is still a risk that US policy makers could push back against USD strength this year and this could slow the pace of potential moves in USD/JPY and EUR/USD in the months ahead.”