The Monetary Authorty of Singapore surprised markets Tuesday night with a policy switch to pursue a slower pace of currency appreciation, its main policy tool.
Wednesday afternoon, New Zealand’s Reserve Bank kept policy unchanged, but significantly altered its language, saying it expects to see a “further significant depreciation” for the kiwi and that “the exchange rate remains unjustified in terms of current economic conditions.”
Hungary’s central bank struck a decidedly dovish note, hinting at easier policy ahead.
The moves follow surprise policy changes from Denmark, India Canada and Switzerland earlier this month. That includes the European Central Bank. Despite a great deal of anticipation, Mario Draghi managed to surprise and impress financial markets with the ECB’s trillion-euro bond purchase program.
“The trend of central bank surprises continues, adding volatility to markets and highlighting a more uncertain global policy stance but one that is partially centered on (foreign exchange) ahead,” Camilla Sutton, chief FX strategist at Scotiabank, wrote in a note this week. “An environment of increased volatility and uncertainty is typically U.S. dollar positive.”
The U.S. dollar has been the beneficiary of those moves and easy policies. In 2015 alone, the dollar has strengthened nearly 7 percent against the euro, more than 7 percent against the Canadian dollar and 6 percent against the New Zealand dollar.
Over the past 12 months, the moves are in the double digits, with the dollar strengthening more than 20 percent against Sweden’s and Norway’s currencies, more than 17 percent against the euro and 13 percent against the yen.
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