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Forex Flash: Risk on, Yen off – Societe Generale

By FXstreet.com,  January 11, 2013, 03:51:00 AM EDT

FXstreet.com (Barcelona) - Societe Generale strategists have taken a look at recent price action and noted an element similarity between Europe and Japan.

They note that as in 2011 and 2012, the New Year has started with investors throwing caution to the wind. CLP, NZD, AUD and MXN are powering on while CZK, ZAR and JPY are lagging badly. They feel that Asian and Latin American currencies will out-perform G3 and Europe though Q1 as a US recession and a Chinese hard landing are avoided, and rally bonds allow investors to ignore economic stagnation and rising unemployment in Europe.

Looking to USD/JPY, they note that the pair has shifted away from simple rate driven valuations and the gravitational pull from Treasuries is fading. They feel that a weaker Yen is supporting the Nikkei, but rising equity indices are weakening the Yen too. Policy-makers are boxed in and cannot afford to under-deliver on promises to ease. They see this as a plus for Japan. Elsewhere, from a quantitative approach, the team note that from a medium term metrics perspective vs Asia, JPY remains overvalued.




The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.


This article appears in: Investing, Forex and Currencies

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