Deutsche Bank analyst George Saravelos said in a report that if the Fed shifts policy from rate hikes to balance-sheet reduction (QT) to tighten, the dollar could weaken. He pointed to Japan: despite slow BOJ rate hikes, the central bank withdrew liquidity via QT at record speed while the yen remained near historic lows. Saravelos warned QT in the US could conflict with the Trump administration’s desire to keep long-term Treasury yields low. He added BOJ independence remains under market scrutin

Deutsche Bank analyst George Saravelos said in a report that if the Fed shifts policy from rate hikes to balance-sheet reduction (QT) to tighten, the dollar could weaken. He pointed to Japan: despite slow BOJ rate hikes, the central bank withdrew liquidity via QT at record speed while the yen remained near historic lows. Saravelos warned QT in the US could conflict with the Trump administration’s desire to keep long-term Treasury yields low. He added BOJ independence remains under market scrutiny; Japan’s finance minister Katayama has discussed using domestic savings to support the Japanese bond market.