Global Tactical Asset Allocation: Currencies

In response to the recent note about the trend reversal in the Yen, Damien Cleusix wrote me to say that his own analysis agrees with that view. Here’s the executive summary from his recent research note:

The Yen overvalued by at least 25%. And the authorities have now started to intervene again (this time jointly) putting an implicit floor below 80. The potential sterilization of the BOJ Yen selling and increase in the size of its balance sheet relative to other countries should push the Yen lower. With regard to repatriation, it is a myth. There are no data confirming it after the Kobe earthquake. Yields spreads are diverging negatively with price. This should ultimately leads to a lower Yen.

Damien has graciously agreed to share his Global Tactical Asset Allocation research for currencies (below). It includes analysis of the Yen as well as the US dollar, the Euro, British Pound, Canadian dollar, Australian dollar and Swiss Franc.

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One Response to Global Tactical Asset Allocation: Currencies

  1. Taufik says:

    Thanks Babak, always good to see you active again with new posts. Damien’s FX report was refreshing. Apart from the Yen weakeningtheme which agree with your call, I wonder how his weak euro theme sqaure with your call of continued stock market trend. Afterall the correlation between all risk-on assets has been the single defining feature of this rally since QE1 started. Your views on the euro and dollar would be helpful.

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