Does a steepening yield curve help or hurt a currency?
A steep yield curve driven by falling short term rates provides foreign bond investors with an incentive to hedge their FX exposure, so would you expect pairs to come under selling pressure when short term rates falling causes yield curves to steepen?
On the other hand, a steep curve driven by rising long end rates suggests higher funding costs to come, so might that have the opposite affect of making traders less inclined to sell that currency or at least not use it to fund carry trades?
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