The BOJ and ECB discover that weakening a currency is tougher than it used to be
Looking back on three months’ worth of extreme market volatility it is clear that global currency wars have entered a new and more complicated phase. In effect, volatility has neutered the power of those central banks that have been most committed to weakening their currencies. The Bank of Japan provides the most notable example of impotence.
It is quite a paradox that a country with Japan’s level of public sector debt can turn into a haven in a global market storm, but that was the case in the first quarter of 2016.
The sharp appreciation of the yen against the dollar despite negative policy interest rates and the prospect of more negativity to come reverses the normal currency market laws of gravity…..