The tightening in the core country will compel the country that is fixing its exchange rate to tighten policy in sync and the core country’s currency will rise more against its trading partners with conventional tightening, leading to greater effective appreciation of the pegging country’s currency as well.
With regard to funding in the market, the rate of increase in the amount outstanding of CP issued, which had been around 10 percent year on year since 2007 until the failure of Lehman Brothers, declined sharply thereafter owing to growing risk aversion among investors, and has recently fallen below the previous year's level.