Global risk appetite faces uncertainty amid Japan's rate hike and US dollar surge: James Knightley
«The strong growth story is there, inflation is somewhat stickier as well, and the Federal Reserve themselves are suggesting that with the fiscal policy side remaining very loose, monetary policy may need to be tighter to offset that support,» says James Knightley, ING.
Just wanted to understand the truth behind the fears of yet another round of yen carry trade after Japan’s finance minister hinting that there could be a round of rate hikes now coming in.
James Knightley: Yes, we are seeing these divergence in central banks coming through and say they have been for a long time this expectation that Japan would hike and they caught markets a little bit by surprise in August of last year and they do are perhaps coming back and again suggesting that they can do more. And of course, you have got Federal Reserve in the United States where markets increasing of the view that the Fed would cut less and less than previously thought.
The strong growth story is there, inflation is somewhat stickier as well, and the Federal Reserve themselves are suggesting that with the fiscal policy side remaining very loose, monetary policy may need to be tighter to offset that support. If they are going to be serious about keeping inflation and at the same time you think of European central banks switch expected to continue cutting rates pretty aggressively. So, you got this quite interesting divergence coming through that is adding to a little bit more volatility now in markets.
This entire chatter of yen carry trade getting challenged
