View: Stay long DXY above 78.09/60 support
Following the onset of QE3 it didn’t take long for the mentions of a currency war to reappear in the headlines with Brazilian FinMin Mantega quick to rekindle his earlier critique of US policy, hardly surprising given the appreciation pressures that previous bouts of QE had stoked below the ‘rich’ BRL. However, looking at quantitative easing as simply a ploy to manage US debasement is rather misleading. Of course it’s not going to be great for currencies with double digit interest rates as Brazil had (in fact it was tightening policy back then) given the narrowed pool of carry currencies traders had to choose from as rates globally collapsed following the financial crisis. But to argue this is purely a dollar phenomenon is wide of the mark with central bank easing set to remains the bias across the G7.
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