Currencies wars in full effect – Rabobank

By FXStreet FXStreet (Guatemala) – Analysts at Rabobank noted that the Federal Reserve kicked off its policy tightening cycle this week with a long awaited 25 bps rate hike.

Key Quotes:

“The move has already sparked a reaction from the Hong Kong Monetary authority and the Mexican Central Bank. The former has raised rates for the first time in 9 years to protect its USD peg and Banxico for the first time in seven years to prevent the MXN from slipping vs. the USD and stirring inflationary risk. “

“There has been speculation in the market that a move by the Fed may pave the way for the BoE to raise rates in 2016.”

“However, we see the dynamic as more complex for the BoE as well as for a number of other central banks. Despite the Fed’s efforts to normalise policy, the global economy is still in the throes of a currency war and the risk that the PBoC will allow its currency to weaken in 2016 may have the impact of prolonging the easing cycle of a number of other central banks.”
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Source:: FX Street