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Heavy speculative positions against the yen created the risk of a sharp reversal in July 2022. The assessment argues that rising recession fears could reduce expected monetary tightening abroad and shift interest rate differentials in Japan’s favor. Markets had yet to price that change, leaving the currency vulnerable to disorderly appreciation if recession concerns intensified.
Read the workGlobal recession risks could reverse the yen’s weakness in the July 2022 assessment. Rising overseas yields had widened interest rate differentials while Bank of Japan yield curve control held domestic yields down. Falling global rates would reverse that pressure, supporting yen appreciation. This was a forecast based on the policy configuration at the time.
Read the workJune 2022 brought $4.0 billion in net portfolio outflows from emerging markets in Jonathan Fortun’s July tracker. Equity outflows of $10.5 billion outweighed debt inflows of $6.6 billion. Chinese equities nevertheless attracted $9.1 billion, highlighting a contrast between China’s inflows and the broader equity retreat.
Read the workRising sovereign spreads complicated the ECB’s planned monetary tightening in June 2022. Robin Brooks, Jonathan Fortun and Jonathan Pingle examine why a firm ceiling on peripheral borrowing spreads could imply unlimited bond purchases and conflict with constraints on monetary financing. They frame the challenge as containing debt market fragmentation without creating an open commitment to finance governments.
Read the workEmerging market portfolios recorded $4.9 billion in outflows in May 2022. Jonathan Fortun’s June tracker separates $3.4 billion withdrawn from equities and $1.5 billion from debt. China’s equities attracted $2.7 billion despite the broader retreat, highlighting the uneven geographic pattern behind the aggregate loss.
Read the workLow sovereign yields could conceal growing dependence on ECB bond purchases. Robin Brooks, Jonathan Fortun and Jonathan Pingle argue that yields held down during the pandemic were insufficient compensation for perceived risks, encouraging foreign investors to sell. Their June 2022 assessment highlights the tension between short term market stability and restoring private demand for peripheral government debt.
Read the workA sharp deterioration in sentiment toward euro area growth stood out at the April 2022 Spring Meetings. Jonathan Fortun and coauthors describe how expectations moved toward their forecast of just one percent growth that year. Beyond discussions of Russia’s war and energy sanctions, they also identify rising concern about possible US sanctions on China, adding uncertainty to an economy already experiencing capital outflows.
Read the workDomestic investors helped emerging markets finance large pandemic fiscal deficits, with foreign buyers and foreign currency issuance playing a smaller role in most economies. This April 2022 analysis explains how a more stable domestic investor base can ease credit and refinancing risks, while warning that government borrowing may displace private credit during recovery. Chile and Colombia stand out for using foreign currency debt and increasing dollarization.
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