Contrary to conventional wisdom, we think monetary policy remains an important variable for asset prices. Interest rates and foreign exchange are two dimensions of the price of money. There is a relationship, even if it is not linear or temporally consistent. Moreover, as a great discounting mechanism, the markets often price in the likelihood an event before it happens. In our day-to-day lives, causes take place before the effects by definition, but in the markets, sometimes, the effect comes place before the cause. The effect was selling yen since earlier this month, for example, and the cause is the Bank of Japan ... (full story)