Forex Predictions Commentary
Published February 14th, 2008 in Reviews Tags: bank of japan, carry trade, china, currencies, currency predictions, euro, forex, mugabe, oil, yen, yuan, zimbabwe.
Forex isn’t really my forte but I’m going to take a crack at commenting on these currency predictions for 2008.
Making any outright prediction is a fool’s errand but since these are tongue-in-cheek - sort of - lets cut them some slack. Here is my take on some of the more interesting prognostications:
Yen
I’m really not sure if we’ll see a return to the glory days of the carry trade (borrow in Yen, invest in a higher yielding currency). The Bank of Japan’s policy board meets this week and most expect them to hold rates steady at 0.5% - the lowest in the world. I don’t think they are driven by the Yen but rather the larger economic picture. Since there is a real possibility of a global recession (a US recession being a foregone conclusion) they may ease but returning to zero is extreme.
Mugabe & the Zim
I don’t think anything will loosen the grip that Mugabe has on Zimbabwe - especially not as long as France stands behind him. Recently they pushed back elections another 2 years to 2010 (the official explanation given was to save money). My guess is that like other tyrants, the only thing to separate Mugabe from his people will be his natural death.
South American Currencies
I don’t really understand on what basis the South American currencies are being predicted to suddenly become “hot” with traders… volatility? political turmoil? trade wars? Gimme something!
Chinese Yuan
China’s government likes predictability and stability which is why you can almost set your clock by the appreciation of the Yuan. I agree that this is a natural break on the Chinese economy but only if the government is successful in squashing excessive speculation. We’ve already seen two examples rise and fall: real estate and Chinese equities.
Priced in Euro
Will oil be priced in Euros? Would it matter? It is beyond me why the currency that a commodity is priced in would matter if it is freely exchangeable. Right now, anyone can “price” or buy oil in Euros. Just sell dollars and buy Euros and then exchange those pieces of paper for oil barrels.
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bank of japan, carry trade, china, currencies, currency predictions, euro, forex, mugabe, oil, yen, yuan, zimbabwe
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2 Responses to “Forex Predictions Commentary”
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Hello,
I’m a trader from Brazil and I think that the South American currencies are now hot among traders because of the rate differential.
For instance, in Brazil the basic interest rate is 11,25%, therefore attracting traders in search of carry trades.
Thanks for your comments. I think it will certainly be an interesting year. Being from Australia we are keen to see the Aussie keep rising, though many complain about the interest rate rising, considering everyone else is getting rate cuts.