On of the safest trades on the street was the long USD short anything else trade which had a decent and asymmetric reward to risk profile over the last two years (2014-2015). That seems to have come to a crashing halt in 2016 as the dollar bulls have run inside for cover. Chart below shows USD performance against EUR, GBP, SEK, JPY so far in 2016
While EUR and SEK have appreciated some 4% vs the greenback, the truly dramatic story is the pace of appreciation of the Japanese Yen. Mr Kuroda and Mr Abe wont be too pleased about this and will only serve to ramp up currency war measures. Japan desperately needs a weaker JPY to service their export oriented economy and import inflation to show that Abe's third arrow stimulus program is effective. Japan needs to do something fast and I suspect there will be some major new central bank stimulus packages to weaken the JPY in in the next 6 months.
No comments:
Post a Comment