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Volatility here to stay as USD no longer funding currency? - RBS

FXStreet (Bali) - According to RBS, if the USD is no longer a funding currency, then volatility can no longer be crushed cross asset as it has been.

Key Quotes

"Monetary policy divergence is the chunkiest theme FX markets have had to chew on for a long time. It means the USD isn’t a global funding currency any more, in our view."

"This really matters. The USD has been a funding currency for much of the last 15 years, since the NASDAQ bubble burst back in 2000, since Greenspan and Bernanke started to worry over American lost decades, and since EUR/USD rallied from mid 0.80s to just below 1.60."

"Global Carry trades have probably been funded mostly (notably again in the last few QE drenched years) out of borrowed USDs. Against this background, if the USD is no longer a funding currency, then volatility can no longer be crushed cross asset as it has been. We believe this is of durable significance."

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