Global currencies react to QE tapering

CURRENCIES

Andrew Broadhurst, head of institutional currency management services at the ECU Group and Fatih Yilmaz, partner at SLJ Macro Partners, explain the impact of talk of a slowdown in quantitative easing on currencies.

Over the past four years, the Federal Reserve has arguably succeeded in achieving its objective through its massive quantitative easing stimulus programme of lowering interest rates and thereby bolstering growth. At the same time both bond and equity valuations have been artificially inflated. The US dollar in particular has been in a persistent multi-year bearish state, as the stimulus growth directly increased the supply of dollars in circulation and investors’ risk appetites gradually increased. It is therefore fair to say that the behaviour of the global currency markets and finan...