David Rosenberg, a semi-permanent expert on global equity markets, has issued a new commentary as he delves into the foreign exchange market with a strong case for selling the USD/JPY pair.
“This may be the most obvious price anomaly on the planet,” he said, with the headline “Want to make 30% returns with little risk? Here’s a rare opportunity to do just that.”
These are the kinds of statements that have humiliated many men in the markets, but the former Merrill Lynch analyst is not afraid to stir up controversy. You can read it here here But some highlights:
- The yen hit a three-decade low in July at 161, and is now at 146 – but the story is not over yet
- Bank of Japan policy shift: Rate hikes just started, bucking global trend
- Japan’s economic outlook improves for first time in 15 months
- Weak yen boosts inflation: Import prices rise 10.8% y/y
- Average return target: 113 yen per dollar (up 20%)
- Big Mac Index shows yen down 44%
- Says to split the difference on a 30% return trade: Buy Japanese Yen via money markets, without stock/term risk
- Main drivers: BOJ tightening vs. Fed easing, unwinding of yen buys
- “The reason for the yen’s slide was the financial repression engineered by the Bank of Japan, but that phase has now ended – first through foreign exchange market intervention and second through interest rate hikes that are far from over.”
This article was written by Adam Bouton on www.forexlive.com.