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12 Apr 2013
Forex Flash: Hard to justify further Yen weakness from here - HSBC
FXstreet.com (Barcelona) - As Japan continues to fight its own holy war against deflation, the Yen selling mania has come to a temporary standstill as the exchange rate faces now the over-talked 100.00 round number.
According to David Bloom, Global Head of FX Strategy, and Daragh Maher, Senior FX Strategist, both representing the banking institution HSBC, "the BoJ’s recent plan to double its monetary base within two years is not so dramatic when compared to the Fed or BoE." They argue that the BoE tripled its monetary base in eight months and the Fed doubled its during 2008.
"The Yen fall has already been greater than anything seen when other countries expanded their monetary base, indicating a lot is now in the price. The link between QE and FX has not been as straightforward as the market is currently assuming" they say.
While the Strategists note that "the market consensus view is that further Yen weakness will be the inevitable result of the dramatic monetary expansion, we do not believe it is quite so straightforward", adding that "even on the most generous interpretation of the link between money growth and FX it is difficult to justify further Yen weakness from here."
According to David Bloom, Global Head of FX Strategy, and Daragh Maher, Senior FX Strategist, both representing the banking institution HSBC, "the BoJ’s recent plan to double its monetary base within two years is not so dramatic when compared to the Fed or BoE." They argue that the BoE tripled its monetary base in eight months and the Fed doubled its during 2008.
"The Yen fall has already been greater than anything seen when other countries expanded their monetary base, indicating a lot is now in the price. The link between QE and FX has not been as straightforward as the market is currently assuming" they say.
While the Strategists note that "the market consensus view is that further Yen weakness will be the inevitable result of the dramatic monetary expansion, we do not believe it is quite so straightforward", adding that "even on the most generous interpretation of the link between money growth and FX it is difficult to justify further Yen weakness from here."