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When some QE matters and some QQE doesn’t – ING

FXStreet (Barcelona) - Petr Krpata, Foreign Exchange Strategist at ING notes that the extension of BoJ QQE brought back some speculations about potential flows into (and support of) higher yielding FX.

Key Quotes

“Yet, history suggests the BoJ QQE plays second fiddle to the Fed’s balance sheet operations. QQE itself did not change Japanese portfolio outflows dynamics either as AUD and NZD are set to decline in 2015.”

“The top-up and extension of the BoJ QQE brought back speculations about its secondary effect on higher yielding “carry” currencies and potential inflows into the FX segment.”

“Indeed, the November RBA Minutes explicitly stated the central bank’s concerns about potential inflows into AUD from Japan and the risk of AUD staying “at a higher level than economic fundamentals would imply”. Are such concerns about AUD and other higher yielding currencies justified? We do not think so.”

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