12-05-2016, 01:34 AM
If it wasn’t clear from the communique from the Group of 20 (G-20) finance ministers and central bankers issued after their 26–27 February meeting in Shanghai, the world’s major central banks hammered home the message through their actions and words over the past two weeks: There is a common understanding that too strong a U.S. dollar is undesirable and that monetary policy actions should be conducive to furthering broad stability among the major currencies. As I see it, there are three parts to the Shanghai co-op agreement:
Connecting the Global Dots: The Shanghai Co-op | PIMCO Blog
Simon Derrick from BNY Mellon said we may be nearing a vicious circle where forced sales by emerging markets push US yields higher. This in turn strengthens the dollar, compelling these countries sell even more reserves, and on and on, until the system short-circuits. “There is the risk of an adverse feedback loop,” he said. Reserve sales have the side-effect of tightening monetary policy within China. This strains the banking system, which has become dangerously reliant on short-term funding in the wholesale capital markets - with echoes of Northern Rock and Lehman Brothers.
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