Originally published at CNBC | February 18, 2013
Side effects are unavoidable in the pharmaceutical industry. All drugs cause them, but sometimes they lead to great opportunities. Think Viagra, originally developed for angina.
So it is with central bank policy, where the law of unintended consequences is perhaps even starker than it is in drug development. In the last month or so, in an effort to stimulate growth, central bankers have begun a new round of creative experiments. This should lead to more market volatility and unexpected investment opportunities, particularly in currencies.
Take the yen, for example. The Bank of Japan (BoJ) recently announced a 2 percent inflation target and said it would pursue “open ended” asset purchases in a bid to reflate the economy. Currency traders have taken note. “Short yen” trades have surged in popularity, pushing the currency down around 15 percent against the US dollar since mid-November – the sharpest sell-off in almost two decades. Continue Reading