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El-Erian on why CURRENCIES are poised for MORE SHIFTS

"When investing in equities, many international investors do so without hedging their currency exposures -- meaning they do not separate the risk from investing in global equities from possible losses (or gains) that could materialize due to currency moves. As such, sharp currency depreciations can also trigger significant equity sales, which, in turn, add fuel to currency moves. Lower policy interest rates will also make the euro more desirable as a funding currency for traders, further causing capital markets to move away from investments in the euro area's government bonds and distressed credits.

I expect all of this to occur in the months to come, particularly when the ECB decides to take additional steps this autumn to loosen monetary policy -- actions that it will deem necessary to help Europe grow and avoid deflation. By itself, the policy move will not be enough to place Europe back on the path of high growth and robust job creation. But it will be sufficient to cause unusually calm and orderly currency markets to become much more volatile."

Source: BloombergView