FX Monthly August 2018 >> There is more to the yen than just carry

QCAM Insight

There is more to the yen that just carry. Caught between disappointingly low inflation and growing pressure to reduce the negative side effects of QE, the Bank of Japan (BoJ) decided to give in a bit to the banks and insurance companies while reinforcing its commitment to boost inflation by maintaining low interest rates. That means the carry trade lives on, but there is more to the yen than just interest rates. Our conclusion of the yen.

The macro perspective

The US economy gathers steam once more. Despite the very advanced stage of the economic cycle, US economic growth is accelerating again. In the Eurozone, on the other hand, the positive momentum of 2017 has not fully carried over into this year. Growth remains robust but risks lurk for both the US and the Eurozone. Our Overview.

FX market talk

Renminbi ripples and trade war rumbles. For decades, China’s currency closely tracked its purchasing power parity in US dollar terms (see chart). But over the past three months, the renminbi has deviated sharply from this path. Uncertainty around tariffs and capital flows between China and the US is the proximate cause for the weakening of the renminbi against the dollar. What are the Chinese authorities planning? Our commentary.

Download: FX Monthly August 2018 EN