Deutsche Bank: If the Fed chooses quantitative tightening over rate hikes, the US dollar could weaken

Odaily reported that Deutsche Bank analyst George Saravelos stated in a report that if the Fed shifts its policy focus from raising interest rates to shrinking its balance sheet (i.e., quantitative tightening) to tighten monetary policy, the US dollar could weaken as a result. He noted that Japan's experience is worth learning from; despite the Bank of Japan's slow pace of rate hikes, it has been withdrawing liquidity through quantitative tightening at a record pace, yet the yen remains at historical lows.

Furthermore, tightening the balance sheet could also create policy conflicts with the Trump administration, which has made it clear that it wants to keep long-term Treasury yields low. He also stated that the Bank of Japan's independence continues to be a focus of market attention. Japanese Finance Minister Satsuki Katayama has even discussed using domestic savings to support the Japanese bond market. (Jinshi Data)