Hi Haim, My take, without much justification, or rather my fears, without too much reasoning, as reflected in my allocation, is that:
(a) USD/JPY stability is due to BoJ manipulation, leading the rest of Asia to do competitive devaluation else lose US market share to each other prudentbear.com . However, I am afraid that when/if the stability snaps, vicious hell will break loose.
(b) USD/EUR volatility is due to the inherent ugliness of Euro, a made-up currency founded on an agreement between a bunch of wealthy and not-so-wealthy socialist and/or rigid states, grinding against the developing ugliness that is the USD, a currency with large obligations, high expenses, endless troubles, and fast printing press. Parade of the uglies, thus hard to pick winners, but must pick, because of global trade/reserve necessities. My fear is that the two uglies will continue to grind against each other, with USD trending down and EUR trending up, until some accident (i.e. a small EUR country wanting to pull out).
(c) Other high yield currencies (CAD, AUD, NZD, ZAR) are too small to matter for global trade/capital flow purposes, can most likely return to their historical highs against the three uglies (USD, JPY, EUR/DM), and therefore are good places to hide.
Chugs, Jay |
