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Market Extra: Rising kiwi illustrates how central banks are pumping up risky assets

Just like the Aussie did earlier this month, the New Zealand dollar strengthened late Wednesday in New York after the country’s central bank cut its benchmark interest rate.

The reaction is surprising to some: Typically, when central banks cut interest rates, their currencies weaken.

But the kiwi’s reaction underscores a relatively recent phenomenon in financial markets: With global central banks once again leaning toward keeping rates lower for longer, global markets have become less volatile. Sovereign-bond yields near record lows and U.S. stocks SPX, +0.55% hovering around record highs, highlights how ultralow yields are driving investors toward assets perceived as risky in search of better returns.

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