⁍ Investors are increasingly looking at government deficits as a gauge of currencies’ fortunes.
⁍ Record low borrowing costs have so far overshadowed concerns about deficits, which tend to devalue currencies.
⁍ The swing in focus from interest rates to deficits and debt ratios spotlights potential winners and losers.
– If you’re looking for a safe place to park your money in the event of a global economic downturn, it might be time to look elsewhere. With interest rates so low and governments so flush with cash that they’re willing to spend their way out of trouble, investors are increasingly looking at government deficits as a gauge of a country’s currency fortunes, Reuters reports. “Most central banks are getting close to as much easing as they can do,” says James Binny, Global Head of Currency at State Street Global Advisors. “In terms of the relative importance of monetary and fiscal (policy), fiscal clearly rises.” Some examples:
Source: https://www.reuters.com/article/us-global-forex-debt-analysis/analysis-who-has-more-in-the-tank-currency-markets-sharpen-focus-on-debt-and-deficits-idUSKBN270216