The week ahead

I woke up this morning and I saw this article in Bloomberg: Goldman’s O’Neill Sees ‘Silly September’ as Yen Appreciates. And this is what I have been thinking all along. Why is the Yen appreciating against the dollar. It has a shaky export oriented economy, a history of economic mismanagement, and really low yielding bonds. Who really things that this can be a good investment. First, the yen appreciation was explained by the flight from risk, but what about now that the conventional wisdom shows that the global economy is on recovery mode. The clumsy Japanese currency is definitely not the way to profit from this. Add to the mix the fact that its export can be slowed by this high exchange rate, and that the Japanese central bank has a history of intervention, and it seems for the Yen it will be all downhill from here.


The euro vs. the dollar, seems to me more like a mind reading game then anything determined by fundamentals. If you ask me Europe is far away from being out of the woods. The European countries are in unfamiliar ground--when was the last time Germany was running a deficit. However, the Euro can continue to appreciate. It tried storming the 1.46 bound, it passed then it retreated, but you can still see that somebody's still pushing. This however will continue to the point where somebody figures out the inflation game---where will it start and who will be first to raise its interest rates.