Asynchronous monetary policies in major advanced economies in response to divergent cyclical conditions have contributed to large and rapid exchange rate realignments. Robust growth and the prospect of higher interest rates in the United States, coupled with the start of quantitative easing in the euro area and further monetary stimulus in Japan, have caused the value of the major reserve currencies to diverge sharply. While the dollar has gained substantially against most other currencies, rising about 9½ percent on a trade-weighted basis since the end of June 2014, the yen has fallen by about 10½ percent in nominal effective terms over the same period, and the euro has been broadly unchanged.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.