Strong currencies depress inflation - SocGen

Kit Juckes, Chief Global FX Strategist at Societe Generale, explains that it’s a feature of the low-inflation era that very few governments or central bankers want a strong currency and that’s just one reason why Bitcoin is doing so well.

Key Quotes

“Strong currencies depress inflation, at least temporarily, and if their impact on competitiveness is exaggerated, it’s still enough to make them take the blame for jobs being lost to other cheaper-currency producers. Once upon a time all this was offset by a sense that a strong currency was a sign of national virility, but such superstition is passé.”

“The problem with no-one wanting a strong currency, is that someone has to lose out. This year, the winner in the FX stakes, (or loser, in a topsy-turvy world where a strong currency is no kind of blessing) is the Mexican peso, reflecting two of the main underlying themes in markets: Trump deflation and the strong current of cash flowing towards emerging markets. The strength of the Zloty and Koruna reflects the fact that the real winners from the European economic recovery aren’t in the euro area but are countries held back by European policies. SEK and NOK both still look like winners.”