This week sounded the starting gun for currencies as central banks around the globe try to kick start their economies using their monetary policies to weaken their currency values in the hope that this will boost their exports. The Kiwi dollar has fallen 4% in the past month as is set for further falls following their Prime Minister’s, John Key, admission that the country’s currency is too strong.
The Eurozone is set to do the same after successive cuts in interest rates have failed to boost bank lending ,mainly as there is no one wanting to borrow money due to poor sentiment. Therefor the only means left to the Central Bank is to follow the UK and US’s lead of using quantitative easing to buy up bonds in the market, therefore realising funds for other investment.
On the flip side the US and UK are looking to scale back their fiscal easing policies in anticipation of stabilising their economies so that they do not overheat after years of easy money and low interest rates.
Russia however is preparing to step in and offer support for their currency, as it hits a new record low, as sanctions take their toll on the country’s access to financial markets.