Talking Points:
• The New Zealand dollar plunged after RBNZ Governor hinted at a possible need to intervene
• Currency manipulation isn't always effective as it depends on the surrounding circumstances
• We look at the various stages of what some believe is a 'currency war' among USD, Euro, JPY and the Kiwi
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The term 'currency war' conjures images of a central bank buying and selling currency aggressively in an effort to manipulate its exchange rate. However, the actual effort - especially among the major central banks - is far more subtle than that. In these policy authorities' efforts to guide their exchange rates, simple commentary and their own 'evaluations' of an overstretched currency often fails to stir the market's interest. The impact of these efforts depends heavily on whether the market sees the possibility that concern can seriously translate into central bank action. The market clearly believed that was the case when RBNZ Governor Wheeler said the Kiwi was too high. Will early concerns from Fed members over the rise of the dollar start to generate discord in rate forecasts? In today's Strategy Video, we discuss the reemergence of concerns over 'currency wars' with a focus specifically on the New Zealand Dollar, Euro, US Dollar and Japanese Yen.
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