Why currency wars matter

Why currency wars matter

Jonathan Baltora, manager of AXA WF Universal Inflation Bonds fund, explains why currency moves should influence your asset allocation decisions.

Post-global financial crisis, central banks have massively expanded their balance sheets through direct bank lending and, in some instances, public and private large scale asset purchase (LSAP) plans. We find balance sheet expansion has very often led to currency depreciation, despite central banks denying this was the objective.Currency shocks are important for future inflation, and backdoor currency depreciations have helped central banks to reach inflation targets. Commodity price swings, currency moves, the size of an economy’s output gap, and inflation expectations can all impact...