Monday February 6, 2006 - 12:06:52 GMT
Share This Story
Black Swan Capital - www.blackswantrading.com
yen 125 and eur 110 says Jen...
â€śThe moral hazard hasn't reversed. In fact, Bernanke, the new Federal Reserve chairman, has made it pretty clear he is a hard-line moral hazarder. In other words, he absolutely does not see it as his business to interfere with asset-class bubbles, even though I believe they are one of the most dangerous things in the long run for the economy. He absolutely does see it, though, as his responsibility to help mediate any economic pain that may come from the downside of any investment bubble.â€ť
It does seem itâ€™s still about yield. Mr. Stephen Jen of Morgan Stanley argues that its â€śnominalâ€ť values,â€ť not real values that are driving the yen and the euro.
â€śWhile foreign investors cite the good growth prospects in Japan in support of their bearish-USD/JPY view, Japanese investors are still so keen on the nominal yield pick-up on foreign assets that capital outflows have overwhelmed capital inflows, supporting the USD/JPY. If the Fed is moving the FFR to 5.00% or above and the ECB does the same, capital flows out of Japan and the desire to hedge against JPY exposure by foreign investors is likely to be so powerful that USD/JPY could be pushed toward 125. On the other hand, real economic fundamentals suggest USD/JPY should be trading close to 100 (our valuation framework estimates). These two centres of gravity make USD/JPY an intrinsically unstable exchange rate, in our view,â€ť writes Mr. Stephen Jen of Morgan Stanley.
Mr. Jen also believes the euro, based on its fundamental value, should be trading around 110 instead of 120. Itâ€™s the petro-dollar flow and â€ścentral bank distributionsâ€ť that are supporting the euro:
Black Swan Capital
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."