Thank you. I have difficulties reconciling this view of persistent future JPY weakness with your short TLT call. I feel that JPY continued weakness would force south east Asian countries including china to keep undervalued currencies to compete commercially which would be a deflationary force through trade for the US and create a bid for UST/ reserve assets via the accumulation of Savings/reserves accumulation over there. I find it more convincing to simply explain the weak yen by an extreme (policy mistake?) monetary policy and forward guidance pushing Japanese savers to invest outside of japan in reach for yield at an unprecedented scale. Eventually we will see international pressure (or action such as coordinated buying) to revalue the yen and it would likely send US yield higher and risky assets much lower as the yen revalues sharply under repatriation flows (with no natural sellers who have been squeezed out of their yen long a while ago). Thanks, YP
Thanks Russell. Simply the best explanation of Yen weakness I have heard this year. I have been long and wrong. This is giving me pause for thought. It makes a ton of sense. Rupert
Mexico has always tended to have higher interest rates and a weak currency. Argentina and Turkey have high interest rates, but weak currencies. The change in tariff policy that benefits Mexico seems to be the big difference to me.
Thank you. I have difficulties reconciling this view of persistent future JPY weakness with your short TLT call. I feel that JPY continued weakness would force south east Asian countries including china to keep undervalued currencies to compete commercially which would be a deflationary force through trade for the US and create a bid for UST/ reserve assets via the accumulation of Savings/reserves accumulation over there. I find it more convincing to simply explain the weak yen by an extreme (policy mistake?) monetary policy and forward guidance pushing Japanese savers to invest outside of japan in reach for yield at an unprecedented scale. Eventually we will see international pressure (or action such as coordinated buying) to revalue the yen and it would likely send US yield higher and risky assets much lower as the yen revalues sharply under repatriation flows (with no natural sellers who have been squeezed out of their yen long a while ago). Thanks, YP
Hi Yvain,
I think china keeping yuan strong has more influence on Asia than yen these days. China is much more a direct competitor.
If China devalued my GLD/TLT trade would be completely wrong
Thanks for this post. So the future of Peso will be decided if the next president decides to re-align the tarrifs with China?
I don't see the US realigning with China absent big political changes in China. And I don't see political changes unless there is an economic crisis
If China went into a soviet style (ie politcal and economic) collapse, I would expect Mexican peso to get destroyed
Thanks Russell. Simply the best explanation of Yen weakness I have heard this year. I have been long and wrong. This is giving me pause for thought. It makes a ton of sense. Rupert
That’s the Real Vision way 🤣🤣
Could the Mexican Central Bank's hawkish interest rate policy be part of what's held up the Peso?
Mexico has always tended to have higher interest rates and a weak currency. Argentina and Turkey have high interest rates, but weak currencies. The change in tariff policy that benefits Mexico seems to be the big difference to me.
Latin America is a big beneficiary of US-China rivalry. So is SE Asia.