8 things we've learned from currency markets in the last year

Fredgraph (4)FREDThe US dollar has been one of the biggest stories of the last year.

In the last year, a lot has changed in currency markets.

The US dollar has rallied significantly, the euro has fallen towards its lowest level in more than a decade, while the Japanese yen, once the center of the currency world, hasn’t done much.

Via Citi’s Steve Englander, here are 8 lessons the currency markets have taught us in the last year:

  • Not every currency shock is a US dollar shock.
  • Currency shocks look bigger than they are, but are as painful as they feel.
  • Bouncebacks occur over time, not the day, or week, or even month after a shock.
  • Asset markets may be moving faster than in the past relative to economies…
  • …a function of low transactions liquidity in periods of stress but lots of assets looking for returns.
  • Investors do not know how to handle incredible correlations.
  • Policymakers do not know how to handle incredible correlations.
  • Positions are often deeper than they look.

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