Deutsche Bank: Fed's Quantitative Tightening May Lead to Weaker Dollar

Deutsche Bank analyst George Saravelos pointed out in a report that if the Federal Reserve shifts its focus from interest rate hikes to quantitative tightening, the dollar may weaken. He noted that Japan's experience is worth considering; although the Bank of Japan has been slow to raise interest rates, it has been able to withdraw liquidity at a record pace through quantitative tightening, while the yen remains at historical lows. Additionally, tightening the balance sheet may conflict with the policies of the Trump administration, which aimed to keep long-term Treasury yields low. Saravelos also mentioned that the independence of the Bank of Japan continues to attract market attention, and Japan's Finance Minister, Taro Aso, has discussed using domestic savings to support the Japanese bond market.