Jumper,
How do you think this will happen (yen back to 100)? It's not that the yen is so strong, it's just the dollar that is so damn weak. And now they voted down raising the debt sealing, how do you think US is gonna pay their debts coming in August or so??
Another Quantitative Easing ahead? (What a nice word for what is really is: printing more money!!) I think 75% of US people have no idea what QE is or the impact it has. I think the only reason why yen is not going to 70 or lower, is the fear for BoJ intervening even with the help of G7....
You are correct, up to a point, regarding the USD weakness rather than the Yen strength for it's current position. However, the Yen IS strong......it is a coincidence that USD is weak, but Yen still attracts 'safe haven' punters, as does the Swiss franc, hence it's strength as well. Of course USD's weakness plays it's part, but it isn't the whole story. Fundamentally both countries (USA and Japan) have a very poor economic outlook, but we aren't seeing a 'race to the bottom'......we are seeing the Yen remaining reasonable strong vs other currencies, as well as USD
You are also correct with the Q.E vs printing money title. Of course it's just printing money......and Obama et al have the cheek to growl at others for currency manipulation......lol.....USA is just as bad as China for currency manipulation!!
To answer you question definitively is difficult, but, lets have a look at things. Prior to the earthquake and subsequent disasters in Japan, their economy was already in a mess.....not helped by huge debt to gpd, losing market share to Korea and China, ageing population, 20 years deflationary cycle etc etc etc. I'm sure you know the fundamentals of the Japanese economy. Their sizable current account is what keeps them in the 'safe haven' bracket, not their economic prowess!
That brings us to the USA's addiction to printing money. We will soon see what is to replace Q.E.2, and I'm thinking it won't be Q.E.3! I really don't think that Obama, however inept he may be, want's to be the one who will be remembered as the prez who engaged in Mugabe economics! If Q.E.3 does materialise, you will probably see the USD tank big time......to the considerable detriment of the rest of the world. Why? Because the commodity currencies will go through the roof, considerably hurting their economies......Yen and Swissy go through the roof, crippling both currencies.....Gold, oil etc etc etc.
Q.E.3 might come, but I don't think so. Above is my opinion of what might happen if it does come. If it doesn't come, and isn't replaced with anything equally stupid, then it is tantamount to saying that 'things are on the improve for Uncle Sam.' It doesn't matter whether that is true or not, we know how the markets react!!!
I see it as Obama and the Fed are somewhat 'backed into a corner'. With Q.E.3, they are damned if they do, and they are damned if the don't. But, no 'money printing' policy EVER rescued a flagging economy. My belief is that, although increasing the rate in USA is unlikely for some time, ending Q.E.2 is likely. The ending of it sends the signal to the world that 'things are on the improve' and it (even more importantly) will help restore domestic confidence in the USA economy.
Obviously this will have an effect of the currency markets, and could be the start of many new trends......not least in the Swissy, Yen, USD. It might also push the Euro and the Pound down to a more realistic level. Same for the commodity currencies.
I'm sure there are holes in my thinking Shamu........I'm not that great at fundamentals, you've probably noticed!!
I'm pretty sure though, that USD weakness is only part of the equation.
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