2016.08.11

Monetary policy becomes less effective for currency

• In textbooks, rate cutting will weaken local currency, but this year several cases show the reverse direction.
• Bank Of Japan took interest rate to negative this year and also saw Yen jump 15.9%. This indicates the ineffectiveness of BOJ’s monetary policy to yen’s waning popularity as funding currency.
• New Zealand also has this problem. Kiwi jumped to highest level when interest rate was cut to its history low to 2%.
• Strong New Zealand Dollar hurts the country’s exports, also make government harder to boost inflation.