Tuesday January 5, 5:10 pm Eastern Time
Morgan Stanley's Biggs calls yen rally worrisome
NEW YORK, Jan 5 (Reuters) - The resurgent Japanese yen represents a major potential threat to Japan's economic recovery and trouble for U.S. stocks and bonds, Morgan Stanley global strategist Barton Biggs said on Tuesday.
In a telephone interview, Biggs said an extension of recent gains in the yen, which closed Tuesday at about 111 to the dollar after reaching a two-year high of 110.46 to the dollar overnight, could have dramatic repurcussions.
The dollar last August hit an eight-year high at 147.63 yen and was hovering in the mid-130s against the Japanese currency as recently as October.
''If the dollar continues to weaken and the yen breaks out to the upside through 110, that would be a major new source of instability and a problem for the world,'' Biggs said.
''It causes the second largest economy in the world to slip further into recession and deflation,'' Biggs said. ''It means Japan exports a new round of inflation to the world and particularly to Europe.''
While such a development could provide marginal benefits to economies in Southeast Asia by making exports from Japan less competitive in world markets, for U.S. economic and financial markets the effects would be negative, Biggs said.
A weaker dollar ''would undermine the U.S. bond market, just as it is now,'' Biggs said. ''Shorter-term I really can't think of anything I particularly want to buy.''
Particularly pricey, Biggs said, are U.S. blue chip stocks, a rally in which powered the Standard & Poor's 500 index to a record closing high of 1244.78 on Tuesday and boosted the Dow Jones Industrial Average to a rally of 126.92 points to close at 9311.19, just shy of a record.
''I think they're the most extended,'' he said. |
