Contributing Editors' Blog Entries

Marc To Market's picture

After relatively large moves in the foreign exchange market since nearly the start of the year, participants were particularly vulnerable to commentary that encouraged a reversal of trend. Japan's Amari got the ball rolling, suggesting that the yen's decline has been sufficient and that excessive strength had been corrected. This encouraged a bout of short-covering and took some shine off the other major currencies as cross positions were unwound.

Then Juncker's comments hit in the North American afternoon yesterday, claiming that the euro's exchange rate was dangerously high. Again the market's reaction was more about positioning than about the policy signal. Part of the demand, after all, for the euro has been coming from some of the largest asset managers returning to the Spanish and Italian bond markets, believing that the Open Market Transaction scheme is indeed a viable backstop.

Vitaliy Katsenelson's picture

 I read that Rich Bernstein, former chief investment strategist at Merrill Lynch, is very optimistic about US stocks; he believes we are at a point similar to where the market was in 1982 – at the beginning of the 1982-2000 secular bull.  After you’ve gone through my slides, you’ll understand why it is so hard for me to share Rich’s excitement.

Marc To Market's picture

Most of the major currencies are consolidating within yesterday's trading ranges. The main feature has been comments from Japan's Minister of Economic Revival that appeared to declare victory in the government's attempt to weaken the yen. News wires quoted him saying that the yen had corrected its excessive rise and was currently in line with fundamentals. This triggered a wave of short covering yen positions, driving the down form around JPY89.60 to near JPY88.60 in initial reaction that lasted about an hour. It has been consolidating since, mostly below JPY88.90. The sharp recovery of the yen was also felt on the crosses, though a more consolidative tone that was seen in the European morning was fading and the currencies moved back toward the lows as North American traders prepared to return to their screens.