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Strategies & Market Trends : Currencies and the Global Capital Markets

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From: Robert Douglas	1/19/2005 12:38:56 PM
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This used to be a very good thread. Does anyone still have it bookmarked and would you be interested in trying to revive it? I've been doing a lot of work lately on the Japanese yen and feel that it is still grossly undervalued. Due to the deflation that Japan has run over the last decade, their currency's appreciation has done little to change the competitive situation as is evidenced by the stubborn trade surplus they still run. Bear Stearns had a comment this morning that mentioned that Japanese policymakers were becoming more focused on "real" exchange rates rather than a nominal dollar/yen rate. [Excerpt] We heard from Economics Minister Takenaka today, who argued that the yen's gains in real effective terms were much smaller than those in nominal terms. This is hardly surprising given Japan's deflationary situation, which dampens the competitive loss generated by nominal yen strength.... since the start of the dollar's slide in the middle of 2001 the yen's real effective exchange rate has fallen, while the nominal effective rate has climbed by around 7%.

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