Central Bank Actions Failing to Devalue Currencies

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. Reuters

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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