JPY May Rise to 80 against the Dollar by Mid-Year
The dollar headed for its largest monthly gain against the euro since October
on speculation growing evidence of a global slowdown will increase the appeal
of the currency to investors as a haven. The euro is poised for the biggest
loss versus the yen in three months after Austria’s Der Standard newspaper
reported that billionaire George Soros said the euro may not “survive” unless
the European Union pushes for a global plan to deal with toxic debt. Japan’s
currency is set for a monthly advance versus Australia’s dollar as slowing
growth prompts investors to repatriate funds from higher-yielding assets.
For many investors the strategy is simple: avoid risk. That means funds are
flowing back into the dollar and the yen. We can’t expect any good economic
news from the U.S. or other major economies.
The euro weakened against 11 of the 16 most-active currencies this month.
There’s a need for a global agreement on how to share the burden of lost
capital, and every country should be involved, Soros told the Austrian
newspaper. “Otherwise even more countries will suffer,” he said. “If the EU
doesn’t do it, the euro may not survive the crisis.”
The yen rose 1.1 percent to 58.10 versus the Australian dollar. Japan’s
current- account surplus makes the yen attractive to investors in times of
turmoil, as it means the country doesn’t rely on overseas lenders.
Investors like selling dollar-yen. Structural yen appreciation has yet to run
its course as there remains scope for investors to unwind shorts. A short
position is a bet that an asset will decline.
The Japanese currency will probably extend gains through to the end of the
country’s fiscal year on March 31 as exporters buy the yen to hedge revenues
and money managers bring funds home amid the global slump.
The yen also may gain as investors reduce so-called carry trades, where they
borrowed in the currency to invest in nations where benchmark interest rates
exceed Japan’s 0.1 percent
