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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: booyaka who wrote (65192)	7/4/2006 10:49:20 AM
From: gregor_us	Read Replies (1) of 110194

Just Checking in Today with Economist's Big Mac Index and their Commodity Indexes shows that as of May 25 2006, the JPY is 28% undervalued against the USD, per the Big Mac Index. More interestingly (and Russ take note) Japan has experienced the worst of the commodity inflation over the past year, as their currency has not kept up. While EUR, GBP, and USD commodity indexes are up 21.3%, 26%, and 26.5% respectively over the past year, the JPY index is up 33.8%. Japan definately needs to think about the trade-offs now with a weak JPY--especially considering they are petroleum-poor. Fukui has said that once the BOJ is done draining excess reserves, they will pause before ending ZIRP to monitor how the short-term money market functions post-ZIRP. If you take his words at face value, the BOJ is highly unlikely to hike next week. Personally, I'm in the "highly unlikely" camp for next week's meeting. Looks like the forex market is leaning towards your interpretation, however, I think the BOJ does indeed go next week, but then signals they are going to hang out poolside for a while. G

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