Currency war revival seen by State Street after yen, euro rally

By Rachel Evans
Bloomberg News
Saturday, January 16, 2016

A flare-up in the global currency war is looming, as a resurgent yen and euro threaten to give policy makers in Japan and Europe an incentive to add monetary stimulus.

Japan's currency advanced versus the dollar for the third time in four weeks, while the euro climbed versus most of its peers. Hedge funds lifted bets on yen strength to the highest in more than three years, and pared wagers against the European common currency. The greenback suffered as sentiment cooled for further currency-supportive interest-rate increases in the U.S. amid sustained market volatility and weaker-than-forecast domestic economic data.

A growing divergence in U.S. growth and monetary policy versus the rest of the world has stalled amid signs the American economy can't wholly escape a slowdown in China and a patchy recovery elsewhere. That's weighing on the dollar, while stymieing the economic goals of the Bank of Japan and Europe Central Bank, which benefit when their currencies depreciate. ...

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http://www.bloomberg.com/news/articles/2016-01-16/currency-war-revival-s...