(Bloomberg) — The minutes from the Federal Reserve’s meeting last month have foreign-exchange traders wondering whether Janet Yellen has joined the currency wars.
Central bankers from Europe to Australia have engaged this year in bouts of rate-cutting oneupmanship, leaving the U.S., and possibly Britain, as the only developed nations seen as likely to raise borrowing costs in 2015. The dollar climbed to its strongest in more than a decade as a result, prompting billionaire Warren Buffett and Goldman Sachs Group Inc. President Gary Cohn to question whether the Fed can now increase rates without damaging the U.S. economy.
“The Fed is finding a very subtle way to temper the enthusiasm around the risks of a sustained dollar bull market that gets out of control,” said Alessio de Longis, a macro strategist in New York at OppenheimerFunds Inc., whose division oversees $11.6 billion. “What the Fed is trying to decelerate a bit is this dollar appreciation in order to make sure that the transition to a Fed hiking policy is more gradual.”
The Bloomberg Dollar Spot Index, a gauge of performance against the euro, yen, pound and seven other major currencies, erased gains after the Fed released the account of its Jan. 27-28 meeting.
“The minutes will heighten, even further, interest in what Janet Yellen says,” Shahab Jalinoos, the global head of foreign-exchange strategy at Credit Suisse Group AG in New York, said by phone. “The potential for big FX moves maybe has increased as a function of these minutes, but I wouldn’t say, in and of themselves yet, they’re enough to change the broader dollar trend.”
Full article: Did the Fed Just Enter the Currency Wars? (BloombergBusiness)