FX Fundamental Analysis
trending markets and there is no cause for doubt or ambiguity in saying that the Yen has been on a winning streak for the past 25 going on thirty years, from a pre-Plaza Accord low against
the
USD of around 261 to its current 77.75, an almost unb el ie v ab le return on an absolute basis of seventy percent, and all
this with a
‘lost decade’ of economic growth in the middle; truly and deeply fascinating.
So maybe this is something else to think about. If the Euro is still ironing out its problems, the UK looks good but is not preferred, the Aussie looks great but is too tied into a potential slowdown in China, and the U.S. enters an election year which could generate both optimism - but the burden of debt is still a nagging doubt - and uncertainty; how about a currency play that stays completely away from all those currencies and keeps the focus
The CNY and the HKD may become
fungible arbitrage with in have each to other
at some point to eliminate any room for
those markets
yield advantage to holding the currency and now the large manufacturing backbone of the Japanese economy cries out for a weaker currency because any further strength will eat further into their profits just as some kind of economic revival seems to be afoot. All this to contend with, yet the currency is booming in value year after
16 FX TRADER MAGAZINE January - March 2012 levels, within Asia?
Japan’s demographic is deteriorating, the national debt is rising, there is no
year and is only about 3 percent above its best ever level of around 75 to the Dollar since the BoJ ’s recent intervention.
Co n v e rsely , the Hong Kong economy is unequivoca l ly b o o m ing with superior credit ratings to Japan as well as lower unemployment and debt-to- GDP ratios. The currency is stable against the Dollar at around 7.7850 simply because of its peg as defined by the Hong Kong M o n e t a r y Authority.
committing
Now while we don’t mind c o m m i t t ing to the idea of discussing to
a
timeframe also would seem a little ambitious at best, so we’ll conclude by recapping on some of the topics already covered here and using them to form what we feel is an ultimately possible outcome for this currency pair, which is currently trading at 10 Yen to the HKD. (In 1984 when the Dollar bought 261 Yen, the
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