Latest / Bloomberg Intelligence / SG's Juckes Says USD/JPY Could Easily Trade Down to 100 (Audio)

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SG's Juckes Says USD/JPY Could Easily Trade Down to 100 (Audio) · Bloomberg Intelligence

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  Speaker 1: to taking Stoff with Kathleen Hayes and Pim Fox on
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  Speaker 1: Bloomberg Radio. Today. The president of the Federal Bank of Dallas,
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  Speaker 1: Robert Kaplan, said he supports the FED moving at a
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  Speaker 1: gradual place. Depending on the economy, that pace could be
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  Speaker 1: faster or slower towards more interest rate increases. Well, the
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  Speaker 1: currency market is betting that after the government reported a
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  Speaker 1: first quarter GDP growth rate of just zero point five percent,
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  Speaker 1: that interest rates are a long way off, and that's
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  Speaker 1: one of the reasons that the Fed continues a three
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  Speaker 1: month drop. Joining us now to sort this all out
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  Speaker 1: for the currency market. Kitch you Global Strategistics Society General
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  Speaker 1: in London, Kit, welcome back. Hi. Well, you know, the
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  Speaker 1: Fed keeps saying one thing, although I think in fairness
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  Speaker 1: to Rob Kaplan. He didn't say that there was going
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  Speaker 1: to raise raids in June or you know, any time,
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  Speaker 1: except that they will at some point. But the dollar
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  Speaker 1: seems to me is it responding as much to the
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  Speaker 1: just the weakness in the economy and the power of
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  Speaker 1: that message. Um, I think it's reacting partly to a
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  Speaker 1: sluggage economy for sure, but possibly even mortally the FEDS
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  Speaker 1: emphasis at the moment on giving the economy a chance.
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  Speaker 1: I'm turning around and saying that even as market measures
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  Speaker 1: of inflation expectations have been edging a little bit higher,
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  Speaker 1: as wage growth has even picked up a little bit,
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  Speaker 1: and you know recently, um, that they're really not bothered.
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  Speaker 1: I think that was one of them, you know. So
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  Speaker 1: there were two messages from the Fed in the middle
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  Speaker 1: of the week. One is, yeah, you know, we're not ready.
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  Speaker 1: The economy is just trundling along. And the second was
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  Speaker 1: we think we think in patient rely measures pressures a
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  Speaker 1: very absent and that means we're not in a hurry.
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  Speaker 1: So you have you have a market that's pricing forward
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  Speaker 1: expectations of inflation higher, a central bank that doesn't care,
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  Speaker 1: and a dollar that's going down. Kit chukes. Can you
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  Speaker 1: tell us who are the people who are the big
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  Speaker 1: players in the foreign exchange market. The foreign exchange market
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  Speaker 1: doesn't move by itself. It's got people behind it. Who
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  Speaker 1: are they? I think that there's been a there's been
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  Speaker 1: a mad rush of all sorts of people to benefit
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  Speaker 1: from the strong dollar in the last I guess the
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  Speaker 1: last eighteen months or so, so European investors who have
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  Speaker 1: been buying US as that European investors who have been
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  Speaker 1: going short of the short of the of the urosay
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  Speaker 1: and long of the dollar when the European Central Band
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  Speaker 1: moves negative reds. There have been certainly an enormous number
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  Speaker 1: of the kind of leverage trading community, the edge one community,
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  Speaker 1: who have had a long dollar that as part of
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  Speaker 1: the gloomy assessment of the global economy and a trade
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  Speaker 1: on a trade on monetary policy diversions. You've had a
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  Speaker 1: lot of hedging from the corporate sector, for whom a
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  Speaker 1: strong dollar is certainly a concern. If you're an American
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  Speaker 1: corporate selling products overseas, you have been hedging pretty much
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  Speaker 1: having you can in the currency in case the dollar rises.
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  Speaker 1: So it's it's companies, it's hedge funds, it's traders and
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  Speaker 1: it's people managing pension funds all over the world, but
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  Speaker 1: too many of them with one trade the same way
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  Speaker 1: around for sure. When we look back at the last
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  Speaker 1: few months, So kit uh, the bigger Japan did not
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  Speaker 1: cut its negative rates even more negative the bigger Japan.
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  Speaker 1: Mr Krona wants to give the recent moves a chance
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  Speaker 1: to work. How has that played out in the currency market?
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  Speaker 1: What does it mean moving ahead? Because one of surprises,
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  Speaker 1: of course, has been the strength in the end. Even
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  Speaker 1: with Japan, we've been to a negative rate policy. Yeah,
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  Speaker 1: I mean, I think they botched their move to negative
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  Speaker 1: rates at the end of January. The the negative rate
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  Speaker 1: policies intended to encourage people to invest overseas. Japanese investors
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  Speaker 1: were invested overseas over enthusiastic be already and in January
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  Speaker 1: when markets were melting down, they couldn't do much more
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  Speaker 1: and that that started this off. Um, you know, either
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  Speaker 1: they've made a policy mistake and they just need to
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  Speaker 1: wait for the for the dust to settle, or they've
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  Speaker 1: they've made a policy to negative rates and they want
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  Speaker 1: to wait and see how it does, how it works,
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  Speaker 1: and their more adult calm and grown up and fools
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  Speaker 1: like me and my like in the market. That's that's
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  Speaker 1: possible too. But either way they may well get dolly
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  Speaker 1: yen a lot closer to a hundred pliant of time
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  Speaker 1: they're done. Um, the yen is strengthening. There's a resistance
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  Speaker 1: at the moment of reluctance to intervene in the foreign
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  Speaker 1: exchange markets. Um. That that's that's not something that people
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  Speaker 1: are keen to do at the moment, sort of fuel
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  Speaker 1: the talk of currency wars. Um. And I think they're
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  Speaker 1: just they're just sitting it out for a bit. But
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  Speaker 1: that the danger is, you know that buying the yen
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  Speaker 1: is the new big thing, just as I don't know,
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  Speaker 1: buying all sorts of other things has been in time.
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  Speaker 1: So we're going to overshoot. I don't know how to
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  Speaker 1: cope with an overshoot to you know, to a hundred
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  Speaker 1: dollar yen, which is another seven per cent or so
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  Speaker 1: from here. You know, do I buy the yen or
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  Speaker 1: do I wait to tell the end there? Or do
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  Speaker 1: I just go and have a long weekend, which I'm
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  Speaker 1: getting here now. And maybe maybe it's got a t
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  Speaker 1: or is something more that starts with than m possibly
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  Speaker 1: kit speak if you can about the investors that may
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  Speaker 1: be trapped in a long dollar trade now unwinding to
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  Speaker 1: go to a long Japanese yen trade. Will they get
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  Speaker 1: trapped there too? Um? Some of them, I think. I
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  Speaker 1: think the rush into the yen at the moment has
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  Speaker 1: been um. Short term traders. I think you've got some.
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  Speaker 1: I think if you've had a balance of people in
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  Speaker 1: the world, you have some long term investors who are
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  Speaker 1: still shortly en um, and you have some short term
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  Speaker 1: investors who are along the n and the short term
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  Speaker 1: investors are moving us right now. I think some of
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  Speaker 1: them may be fact. I mean, you know, not a
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  Speaker 1: lot of people have been gods of trading in this
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  Speaker 1: market in the last three months. It's been a very
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  Speaker 1: difficult start of the year with with with trends breaking
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  Speaker 1: up and moving quite violent the other way. So I
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  Speaker 1: would expect several people, you know, plenty of people, more
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  Speaker 1: people than I can count, will well, we'll find that
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  Speaker 1: they can't manage the full in doll again and then
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  Speaker 1: the subsequent bands and um, and you know, I don't
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  Speaker 1: think we could. We could easily trade down near a
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  Speaker 1: hundred and up near a hundred and twenty old before.
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  Speaker 1: I don't know if you're like the fourth of this right.
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  Speaker 1: Thank you very much at Kit Juke's Global strategy Associate General.
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  Speaker 1: The end right now trading at one oh six to
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  Speaker 1: the dollar, Eurospot one fifty, and the British pound at
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  Speaker 1: one forty six. Japanese yends gained eleven percent against the
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  Speaker 1: US dollars since the beginning of the year. You're listening
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  Speaker 1: to taking stock on Bloomberg Radio China's economy. What do
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  Speaker 1: you really need to know and how much can we
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  Speaker 1: trust the economic statistics out of China. Coming up on
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  Speaker 1: Bloomberg Radio, we're going to tackle that question and more.