The Course of Monetary Policy?

by: , Portfolio Strategist, New York Life Investment Management

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 traded higher against a basket of currencies, trimming last week’s losses.
  • Both the Federal Reserve and the Bank of Japan are scheduled to meet next week to determine the course of monetary policy.
  • Markets are currently suggesting a low likelihood of a Federal Funds Rate hike in September, about one in five, favoring instead, a December rate hike at 54%1.

Currency Movements are Difficult to Predict

september13-currency-rates-etfs-091516-chartSource: Bloomberg, 7/26/16-9/13/16. 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.

1. The probability of a rate hike is calculated by Bloomberg using implied probabilities derived from the Federal Funds Futures Curve. As of 9/14/16.

The information and opinions contained herein are for general information use only. MainStay Investments does not guarantee their accuracy or completeness, nor does MainStay Investments assume any liability for any loss that may result from the reliance by any person upon any such information or opinions. Such information and opinions are subject to change without notice, and are not intended as an offer or solicitation with respect to the purchase or sales of any security or as personalized investment advice. There can be no guarantee that any projection, forecast, or opinion in these materials will be realized. Past performance is no guarantee of future results.

All investments are subject to market risk, including possible loss of principal. Diversification cannot assure a profit or protect against loss in a declining market.

Securities distributed by NYLIFE Distributors LLC, 30 Hudson Street, Jersey City, NJ 07302, a wholly owned subsidiary of New York Life Insurance Company. NYLIFE Distributors LLC is a Member FINRA/SIPC.


Robert Serenbetz

Portfolio Strategist, New York Life Investment Management

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

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