FX investors to seek out higher-yielding currencies – SocGen

A slow-moving Fed and more balanced global growth will continue to encourage FX investors to seek out higher-yielding currencies, fretting all the while that they may be picking up pennies ahead of a trundling steamroller, according to the analysis team at Societe Generale.  

Key Quotes

“Monetary policy destinations and FX valuations will continue to matter. The dollar looks dull, but a bit expensive given where real yields are. The euro is cheap but needs markets to discount far into the future in order to benefit from a hiking cycle that will only start in 2019. Yen bulls may have to wait even longer before the BoJ lets the yen off the leash, but when it goes up, there will be a bang.”  

“Of the other G10 currencies, we are bullish NOK and the Norwegian curve is the only one where, today, rates are expected to be higher in 2027 than they were a year ago. We’re also modestly bullish on both the AUD and CAD, preferring both to the NZD or the USD.”