Investors have become acclimatised to developed economies trying to boost growth by devaluing their currencies, taking away the one-way bets on exchange rates such actions created in the recent past.
The Bank of Japan, the European Central Bank and Sweden’s Riksbank are all creating new money through asset-purchase programmes, have interest rates below or close to zero, and are expected to ease policy further in 2016.
Their aim is to weaken demand for their currencies and boost inflation and growth as their exports become more competitive and imports get pricier. But it is not working out as they hope.
Far from losing value, the yen hit a 4-1/2-month peak against the dollar this week and the euro hit a 12-week high on a trade-weighted basis. The Swedish crown is near 10-month highs versus the euro.