Japan Eases Endorsing

by: , Portfolio Strategist, MainStay Investments

Foreign currency can have a meaningful positive or negative effect on a portfolio’s performance, depending on the movement of the local currency vs. the U.S. dollar.

Foreign Currency Update

  • The U.S. dollar rose in the currency markets for the week, ahead of the Federal Reserve Open Market Committee (FOMC) meeting, aided by higher than expected U.S. inflation data and technical sentiment.
  • The Bank of Japan (BOJ) endorsed expansive easing early Wednesday morning, maintaining its negative interest rate policy and implementing a yield curve control. However, the news did little to overcome the market’s skepticism over Japan’s ability to generate inflation.
  • Global monetary policy is likely to remain an important driver of currency movements.

Currency Movements are Difficult to Predict1

september20-currency-rates-etfs-092216-chart

1. Source: Bloomberg, 8/2/16-9/20/16. EUR/USD Spot Exchange Rate where the price of 1 EURO is in USD. The calculation is the one week percentage change in spot exchange rate where a negative value is the depreciation of the Euro. JPY/USD Spot Exchange Rate – price of 1 JPY in USD. The calculation is the one week percentage change in spot exchange rate where a negative value is the depreciation of the JPY. The U.S. Dollar Index (USDX) indicates the general international value of the USD. The USDX does this by averaging the exchange rates between the USD and major world currencies. A negative value indicates a general depreciation of the dollar.

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Robert Serenbetz

Portfolio Strategist, MainStay Investments

Robert Serenbetz is the Portfolio Strategist for the Strategic Asset Allocation & Solutions Group (SAS). He contributes to investment thought leadership and communication efforts across New York Life Investment Management

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