BOJ Surprise Stimulus Could Reignite Currency Wars

The Bank of Japan’s (BoJ) stimulus blitz raises the specter of currency wars as a rapidly weakening yen threatens the competitiveness of export-driven economies, say strategists.

“Whenever you have these kinds of disruptive moves by central banks, there’s always going to be fall out effects,” said Boris Schlossberg, managing director of FX strategy at BK Asset Management.

Markets were caught off guard by the BoJ’s announcement on Friday that it would expand purchases of exchange-traded funds (ETFs) and real estate investment trusts, extend the duration of its portfolio of Japanese government bonds (JGBs), and increase the pace of monetary base expansion.

The yen plunged nearly 3 percent against the U.S. dollar on Friday and extended its selloff on Monday, falling to a fresh-seven year low in early Asian trade. It last traded at 112.71.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza