Woolnough: Beware the currency vigilantes

CURRENCY VIGILANTES

With QE eliminating the ability of bond vigilantes to enforce market discipline, M&G's Richard Woolnough warns ‘currency vigilantes' could now be the biggest threat to monetary policy.

Woolnough, who manages more than $9.5bn across three M&G fixed income vehicles, says traditional bond vigilantes are being overwhelmed in attempts to force higher bond yields by the opposite effects of QE. He believes this has forced the rise of currency vigilantes. "QE aims to produce a low interest rate environment with a traditional level of inflation by having negative real yields all the way along the yield curve," Woolnough says. "However, before you get there the currency vigilantes could well turn up to break up the QE plans. "If the authorities are actually or are merel...