Wednesday November 30, 2005 - 11:46:17 GMT
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Black Swan Capital - www.blackswantrading.com
$ - Gold - yen
“There is nothing like desire for preventing the things one says from bearing any resemblance to what one has in one’s mind.”
Is gold due for a rest? Will the dollar follow? Or is the dollar leading?
A very interesting piece in The Financial Times penned by Steven Johnson yesterday, “Yield pattern of the leading currencies ‘poised for reversal’”:
• “Yield does not always drive currency markets. Japan has had lower interest rates than the US for 23 of the past 27 years, yet the yen has appreciated against the greenback in 16 of those years.
• Since 1978, investors gambling that higher-yielding developed world currencies would outperform their lower-yield peers would only have had a 50/50 chance of being proved correct.
• Merrill’s [Lynch] analysis suggests this pattern [high yielding currencies leading the way] tends to reverse when at least three more central banks are raising rates than cutting them, or when the carry on the lower-yielding currencies is, on average, rising. (Both conditions currently being met.)
Merrill loves the yen. According to Mr. Johnson, Merrill is “revising its forecast” on the yen—they see Y87 against the dollar by December 2006. Yikes!
It’s no matter if this proves true or not—well I guess it’s of some matter—but you gotta just love an out of the mainstream view like that. We’ve added USDJPY to the Gold vs. US $ Index chart shown above. Step right up and place your bets…
Black Swan Capital
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