Thursday, September 16, 2010
Let’s get the obvious out of the way and point out the fact that after 3 committee hearings, a parliamentary no confidence motion and every exporter having threatened to walk out of Japan it has finally happened: Nato “Yen We” Kan has decided to run USD/JPY up in a good number of people’s faces – thankfully none of them members of TMM. The intraday moves below in USD/JPY have been remarkable for those who stayed the course:
As for TMM, we’ve been hiding out in crosses that are lighter on crucifixion like SGDJPY and have had a reasonable time of it.
However, it does look as though we are heading towards our previously expressed concerns of a new arms race in the war of competitive devaluations we posted in “Extreme sport fx-devaluations” . This is not the only thing worth noting in FX though – USD/CNY has been moving again and at a steady clip over the last few days, coincidentally as the IMF and everyone else with a few brain cells to rub together notes the strong undercurrent of protectionist sentiment contra China.
How long this lasts is anyone’s guess – TMM has tried to use many models to evaluate CNY movements but none is quite so effective as how punchy the Commerce Department is getting on steel tube and the like and when Chuck Schumer is next to open his mouth in a public forum. If China flakes out on this deal as it did 3-4 months ago the world is not going to be any more patient as to China’s willingness to play its part in global rebalancing.
But back to generalities. It’s a right old mess out there at the moment. There are so many broad macro themes all colliding at the moment it looks like a slow motion replay of a motorway pile up. Deflation meets printing presses, meets commodities, meets politics, meets intervention, meets civil unrest, meets desperation, meets Voldemort. Picking the bones for direction with that lot all going on is becoming tough to say the least. Unless you are a gold-bug of course, in which case your only concern must be if EVERYONE knows it’s going to 1500 then 3000, then why the hell hasn’t it?
We were far too early in thinking about selling Euros as the mad dash correction back from uber-pessimism seems to have picked up a pace. Chinese interest in the well received Spanish Auctions today, the Greek snake oil roadshow, IMF report on Greece (how the hell can you believe any figures coming out of Greece?), perceived printing presses in the US, the belief Europe would be the last willing player to print or intervene, CHF/periphery Europe unwinding and suddenly you see EUR taking the place of the BoJ controlled JPY or the CHF as a default buy/unwind.
But whilst the Eurocrats appear to have hired Max Clifford to do their PR, we still know that the Euro bull story ultimately belongs in the pages of tabloids and it will all end in Eurotears.