I noticed a Reuter’s poll today. All the top banks were asked to provide their guess on just how undervalued the Chinese currency—yuan- was against the US dollar. The average guesstimate was about 20%. That’s about 20% lower than my guess would have been, but no matter. What was interesting was their guess about when the Chinese currency would actually become convertible.
For the past year – since November 4, 2008, actually – I’ve thought about walking around wearing a T-shirt that reads:
Where’s your skepticism?
That way I could maybe get the majority’s brains turning a little bit. (I’ve thought about using “Got skepticism?” but figure milk is probably tired of getting ripped off over and over again.)
We are taking a little break today. In place of my usual ramblings, below is an excellent article by Chris Fournier and Yasuhiko Seki of Bloomberg laying out the case for a weak yen based on the very ugly set of economic fundamentals and debt picture facing Japan.
Maybe USDJPY goes lower as institutional money is repatriated back into Japan given rising domestic risk. But sooner or later we think Japan’s economic fundamentals will feed into the currency in a big way.
This isn’t an entirely new idea – we’ve made the connection in Currency Currents before and have since seen it presented elsewhere.
Yesterday the near-term VIX (volatility index) stormed higher and failed to make a legitimate test of support.
Today's Ben Bernenke's talking about the greenback was exceptional and caused a spike in the forex. Ben Bernenke has assured the monetary policy following of the strong dollar policy and caring of the inflation upside risks which can result from the dollar weakness versus the commodities and energy prices which can tackle the fed's stimulation package from another side. Ben Bernaneke has assured today that the price stability is very important to the fed as the unemployment and the current struggling growth rates. Previously, Greenspan was the talker about the interest rate and the John Snow the former treasury secretary was the talker about the dollar, so today Ben Bernanke's speaking about the dollar has been read as a try to support barrack Obama's Asian visit and his efforts for a stronger Yuan exchange rate and that's why it has been a short lived spike and the greenback came back down across the broad giving back his quick gains quickly as it has made it as the market has lessened an actual action possibility from the fed concerning this proposal right now but anyway it looked like a sign to the market to prepare it of an ending the current quantitive easing policy in appreciation of the recent economic improvement and storing the price stability and this talking from the fed was not discounted before.
