What the Fed does is what really matters for markets
Nov 7 (Reuters) -What the Fed does is what really counts for markets. Most central banks tend to follow what happens in the U.S., but those that are inclined to push back create situations that often have serious consequences.
These can manifest as extreme currency moves, with the greater the will to battle against the effects of U.S. policy, the bigger the impact. Japan's yen, which dropped to an all-time low on a trade-weighted basis this year, is a prime example of this, but it is certainly not the only one.
Several other currencies are exploring record lows, and some of these moves have thrown up other extremes. While India's central bank has resisted the rising dollar, volatility dropped to a record low and FX reserves hit a record high.
For many nations any resistance to the U.S. tightening cycle has proved futile. A bunch of currencies fell to record lows including China's yuan, the Philippine peso, South African rand, Hungarian forint, Chilean peso and Turkish lira.
Although the anticipated series of interest rate cuts may only unwind half of the series of hikes that preceded it, the easing cycle will surely shift the dynamics that have influenced currencies for several years.
Some relief could be afforded the currencies that suffered so greatly, which could follow South African rand's lead to rally during a cycle that may last the whole of next year.
If history repeated Trump might hurt dollar nL8N3MD29K
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(Jeremy Boulton is a Reuters market analyst. The views expressed are his own)
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