The European Central Bank and the Bank of Japan are trying to push down the values of their respective currencies with the use of negative interest rates, former Bank of England Gov. Mervyn King said.
"There are clearly limits" to the effectiveness of negative rates, King said Monday. "I think you can see with Japan and the euro area, that in essence the central banks are trying to push down the exchange rate. Most countries in the world could say, 'Now, if only the rest of the world was growing normally, we'd be fine. But since it isn't, we aren't. What's left? Push down the exchange rate.' "
The ECB and BOJ contend they are not intentionally aiming for weaker currencies with easing policies aimed at boosting growth and inflation. ECB President Mario Draghi said earlier this month that while "it is true that some of the measures have obviously a spillover on the foreign-exchange market," the measures introduced "are entirely addressed to our economy" and that the ECB is "not in this war at all." The BOJ has denied it is seeking to manipulate the yen's exchange rate.