As the global economy continues to weaken investors have been forced to buy dollars as debts unwind and Yen as the carry trade unwinds. It’s been baffling for many investors because the U.S. and Japan are extraordinarily weak economies. If you’re in the deflationist camp (as I still am) and a believer that the worst isn’t necessarily over you have to continue being bullish on both. I think the stability in both currencies is a clear sign that the de-leveraging process is far from over. In addition, as the largest economies in the world, both currencies are safe when compared to others. The likelihood of a run on either currency is near 0%. I’ve been bullish on Yen for years (though I believe the dollar will remain strong I would not buy it) and moreso after the recent decline. With equity markets looking frothy and risks abundant, I believe we could easily see a 5%+ move in Yen to the upside before the end of the summer.
Tom Keene has some more insight here:
Disclosure – I am long Yen.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.