Economic theory suggests low interest rates should decrease the value of a country's currency — but one veteran strategist told CNBC that central banks' adoption of negative rates was "meaningless" for the foreign exchange markets.
Several major central banks have introduced negative rates in a bid to stimulate the economy and persuade businesses and households to spend and invest rather than save. Notably, the European Central Bank now has a deposit rate of -0.4 percent, while the Bank of Japan has a deposit rate of -0.1 percent for some reserves.
In theory, lower rates decrease the value of a country's currency, suppressing the yield available, and making it less attractive to foreign investment and for foreign exchange traders to hold. But with the adoption of ultra-low interest rates across the developed world, small differences between currency yields may be more significant than the fact that one central bank has breached the zero-mark and adopted negative rates.