Morgan Stanley warns that the world is revisiting the “ghosts of the 1930s” as one country after another tries to steal a march on others by devaluing first
Sweden has cut interest rates below zero and launched quantitative easing to fight deflation, becoming the latest Scandinavian state to join Europe’s escalating currency wars.
The Riksbank caught markets by surprise, reducing the benchmark lending rate to minus 0.10pc and unveiled its first asset purchases, vowing to take further action at any time to stop the country falling into a deflationary trap. The bank presented the move as precautionary step due to rising risks of a “poorer outcome abroad” and the crisis in Greece.
Some Investors See Single Currency Falling to Parity With U.S. Dollar
A day after the European Central Bank unveiled its bond-buying program, the single currency still was in free fall, blowing past analysts’ expectations for how low the euro can go.
Some investors now say the euro could fall to the point where it is on equal footing with the U.S. dollar for the first time since it climbed above the buck in late 2002.
“If you would have asked me a few months ago, I would’ve said that parity could be in the cards in the years ahead. Now, we can’t rule it out anymore even by the end of this year,” said Thomas Kressin, head of European foreign exchange at Pacific Investment Management Co., or Pimco, which has $1.68 trillion under management. Continue reading
Sunday, a top European Central Bank policymaker described how the bank will approach an asset purchase plan to tackle low inflation in the single currency bloc, saying that such a program “would not be about quantity, but about price.”
The ECB acknowledged after its policy meeting in early April that it is open to turning on its money-printing presses to keep inflation from staying too low, though it has not yet shown any public signals of starting quantitative easing (QE) yet. Continue reading
China reduced its holdings of US Treasury debt in December by the most in two years as the Federal Reserve announced plans to slow asset purchases.
US government bonds held by China – the biggest US creditor – fell by US$47.8 billion, or 3.6 per cent, to US$1.27 trillion, the largest decline since December 2011, Department of the Treasury data released on Tuesday shows. At the same time, international investors increased holdings by 1.4 per cent, or US$78 billion, in December, pushing foreign holdings to a record US$5.79 trillion. Continue reading
“The question is not tapering. The question is at what point will they increase the asset purchases to say $150 [billion] , $200 [billion], a trillion dollars a month,” Faber said in a ” Squawk Box ” interview.
The Fed-which is currently buying $85 billion worth of bonds every month-will hold its October meeting next week to deliberate the future of its asset purchases known as quantitative easing. Continue reading
A record amount of money poured out of exchange-traded and mutual bond funds in June, according to a fresh report by TrimTabs, nearly double the amount pulled out of bond funds at the height of the financial crisis in October 2008.
Investor fears over the scaling back of the U.S. Federal Reserve’s bond purchasing program has seen the yield on 10-year Treasurys rise sharply to 2.5 percent as $80 billion left bond funds in June, according to the research.
“The herd is scrambling for the exit this month as bond yields back up across the board and central bankers hint that they might provide less monetary stimulus in the future,” TrimTabs CEO David Santschi said in a research note on Sunday. “We estimate that bond mutual funds have lost $70.8 billion in June through Thursday, June 27, while bond exchange-traded funds have lost $9.0 billion.” Continue reading
Wednesday night’s panic in Tokyo, where the Nikkei dropped a stomach churning 7pc, kicking off a global chain-reaction that saw the FTSE fall 143.48 points, demonstrates just how difficult it is going to be for the world’s central banks to exit their loose money policies.
It’s not even as if Ben Bernanke, chairman of the Fed, said he was planning to exit; in fact, initially he said the reverse, in testimony to Congress. It was only in the Q&A, and in minutes to the last meeting of the Fed’s Open Markets Committee, that a clear bias emerged to slow the pace of asset purchases “in the next few meetings”, so long as the economic data were strong enough. Continue reading