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from Breakingviews:

Dollar to give other currencies beating many want

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By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The dollar should make its way back from oblivion in 2014 as the Federal Reserve stops printing greenbacks like monopoly money. Emerging market currencies look vulnerable to a whipping they don’t want, the yen should continue to slide happily, the euro will ease and the pound will end up competing with the dollar at the front of the currency race.

It’s easy to forget just how down the dollar is. An index of its value against major trading partners hit its lowest ever level in 2008. It returned close to those lows in the spring of 2011 and hasn’t risen that much since. Federal Reserve money-printing has debased the world’s reserve currency. As the money-printing slows or stops, the dollar is liable to begin an advance. That could lead to blood-letting which most, though not all, currencies will welcome.

The yen is just asking to be taken down. Japan’s money-printing will probably achieve a 120-yen-to-the-dollar rate some time in 2014. But it’s far from a safe, steady bet. If global markets react badly to Fed tapering, risk aversion may set Japanese investors running for cover in Japan.  A yen that many investors will be trading short could then appreciate fiercely.

from Global Investing:

Watanabes shop for Brazilian real, Mexican peso

Are Mr and Mrs Watanabe preparing to return to emerging markets in a big way?

Mom and pop Japanese investors, collectively been dubbed the Watanabes, last month snapped up a large volume of uridashi bonds (bonds in foreign currencies marketed to small-time Japanese investors),  and sales of Brazilian real uridashi rose last month to the highest since July 2010, Barclays analysts say, citing official data.

Just to remind ourselves, the Watanabes have made a name for themselves as canny players of the interest rate arbitrage between the yen and various high-yield currencies. The real was a red-hot favourite and their frantic uridashi purchases in 2007 and 2009-2011 was partly behind Brazil's decision to slap curbs on incoming capital. Their ardour has cooled in the past two years but the trade is far from dead.

from Breakingviews:

Sterling flirts with safe-haven status

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By Ian Campbell

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Is sterling now a safe haven? Not exactly - the pound has too much going against it for that, including dovish rhetoric on monetary policy from Mark Carney, the new head of the central bank. But in the currency contest, the UK looks less handicapped than most of its major rivals.

from Breakingviews:

Japan’s dealmakers deflated by Abe’s arrows

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By John Foley

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Shinzo Abe may yet revive Japan’s economy, but so far he has done the opposite for the country’s chief executives. The volume of overseas mergers this year has been positively lethargic. The prime minister’s efforts to cheapen the yen, and volatile markets, partly explain the lull, but the case for going abroad remains strong.

from Breakingviews:

Market jitters could crush Japan’s inflation drive

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By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Skittish markets are a threat to Japan’s anti-deflation drive. The rising yen, falling stocks and lower government bond yields suggest investors once again view Japan as a safe haven. The Bank of Japan may need to be bolder to prevent their expectations from becoming self-fulfilling.

from Breakingviews:

Japan e-book: Abe’s Economic Experiment

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By Peter Thal Larsen

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Japan’s prime minister has electrified investors with his three-pronged strategy to shock the country out of its economic malaise. Abenomics has profound implications not just for Japan, but for the rest of the world too. Our new book examines the economic phenomenon of the year.

from Anatole Kaletsky:

The radical force of ‘Abenomics’

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Japan's Prime Minister Shinzo Abe in the cockpit of T-4 training jet at the Japan Air Self-Defense Force base in Higashimatsushima, Miyagi prefecture, May 12, 2013. REUTERS/Kyodo

'The 3.5 percent gross domestic product growth announced by Tokyo Wednesday suggests that Japan may be the fastest-growing economy in the G7. Since the Tokyo stock market hit bottom exactly six months ago, the Nikkei share index has soared almost 80 percent. Meanwhile, the yen has experienced its biggest six-month move against the dollar. All these events appear linked to the election of Shinzo Abe and the regime he has installed at the Bank of Japan.

from Breakingviews:

Abenomics pulls Japan from its post-Lehman slump

By Andy Mukherjee

(The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

Prime Minister Shinzo Abe’s policies have beaten back the Japanese economy’s post-Lehman blues. Breakingviews' Abenomics Index was at its highest level in March since September 2008. And that was before the Bank of Japan launched its bold money-printing pledge.

from Breakingviews:

Three-digit yen no longer a one-way bet

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By Andy Mukherjee
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The yen is no longer a one-way bet. The Japanese currency has slumped to 100 against the dollar for the first time in four years. That’s a 16 percent slide since Shinzo Abe’s landslide election victory in December. At the time, Breakingviews predicted his victory would herald a three-digit yen. But there are good reasons to be sceptical about a further decline.

from Global Investing:

Japan’s big-money investors still sitting tight

More on the subject of Japanese overseas investment.

As we said here and here, Japanese cash outflows to world markets have so far been limited to a trickle, almost all from retail mom-and-pop investors who like higher yields and are estimated to have 1500 trillion yen ($15.40 trillion) in savings. As for Japan's huge institutional investors -- the $730 billion mutual fund industry and $3.4 trillion life insurance sectors -- they are sitting tight.

If some are to be believed, the hype over outflows is misguided. Morgan Stanley for one reckons Japanese insurers' foreign bond buying may rise by just 2-3 percent in the next two years, amounting to $60-100 billion. Pension funds are even less likely to re-balance their portfolios given large cash flow needs, the bank said.

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