FX FUNDAMENTAL ANALYSIS
uncertain European environment. It would not surprise us if, in the coming quarters, the European Central Bank launched its own version of quantitative easing to weaken their own currency but that’s another story.
Chart 5: Japanese Yen Spot - Daily chart
economic growth needed to tackle their fiscal hole (the recent downgrade to GDP and a weaker Tankan business report highlight the bigger issues at hand even aſter a 25% currency move). Tey need constant currency depreciation for the policy to work in the longer term. Terefore, aſter the currency depreciation starting over a year ago, the year on year depreciation has already slowed which means that the authorities in Japan will be working hard to build on policies to maintain a weak currency environment.
It is oſten easier to find the liability currency when
seeking structural
trades, it is perhaps human nature to seek out the dangers ahead rather than focus on the positive global opportunities. Given that the Japanese authorities remain fully committed to “Abenomics” we have put together a strong case for a dramatically weaker currency over time. Naturally, as foreign exchange managers we have to decide on the asset currency. What
14 FX TRADER MAGAZINE January - March 2014 will work best when shorting the Yen?
Whilst the Euro (and Sterling to a certain extent) have enjoyed aggressive rises in the past few weeks, we remain concerned about the long term attraction of the Euro in a broadly
It is the US Dollar that we believe will be strong. There are several reasons to be bullish about the US Dollar. In simple and historic terms, it looks cheap but there have been some obvious headwinds in the recent past which appear to be diminishing. The US economy has been the best performing economy of late and there is every chance this will continue. Plenty has been written about the ability of the US domestic economy to generate growth and, especially compared to other economic blocks, the US has
A weak Yen is a target of the Japanese authorities
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