Week In FX Asia – Will Abe's Policies Weaken Yen Further in 2014?

There is great expectation that the U.S. and Europe will lead any rebound in the developed market. Next year, the U.S. is expected to reduce the fiscal drag (increased taxes and spending seizures) that the American economy has endured in the last few years. Hopefully, this will lead to a consensus of a real growth rate of approximately +3%. That's a far better prospect than what's unfolding across the Atlantic. Recent hard and soft European data would suggest a more muted and gradual recovery for the 17-member single currency bloc.

In Japan where Abenomics reigns, additional monetary easing, and stimulus from Abe's third arrow (read: privately financed projects), should be capable of compensating the fiscal tightening (sales tax) Tokyo will initiate at the end of the first quarter in 2014. Japan is an export driven economy, a country that requires a weaker yen to further boost exports and economic growth. Critics of Abe's three arrow policies are certainly wary of the fact that increasing the inflation rate to 2% may not necessarily increase consumption and economic activity. Even changes in the structure of Japan's economy, do not necessarily mean that a lower currency may have the same effect on exports and growth. The short-yen trade has dominated many forex portfolios this past year. It has certainly been a trade of “patience,” a trade that's expected to continue to dominate in the coming year.

Please read more in Global Currencies Forecast: 2014

  Forex News Round Up | Latest Forex Market Trend – Market Pulse Japan's Agriculture Law Changes Next on Abe's Agenda Rare Riot Reignites Singapore Social Stability Doubts Chinese Leaders Pledge To Push Reforms in 2014 Experts Cites Top Three China Risks Nikkei Expected To Rise 16% In 2014 RBA Heard ‘Loud and Clear' as AUD/USD at 0.8950 Nikkei To Hit 22,000 In 2014 – Barclays Japan Ruling Parties Approve Tax Reform Policies for 2014 China Bad Bank Shares Impress on Debut Yuan Weakens As Regulators Restrict “Hot Money” Flows 30 Year Anniversary of the Floating of the Australian Dollar NZ Inflation Accelerates as RBNZ Signals 2014 Rates Move Japan Wholesale Prices Climb 2.7 Percent YoY Due to Weak Yen Japan's Ruling Party Seeking to Cut Taxes on Daily Necessities Japan's Tankan Survey Shows Business Confidence and Spending Outlook Positive Japan Plans to Spend $1.3 Billion on Employment Stimulus Japan Asks for US Flexibility on TPP Talks No Trans-pacific Trade Pact This Year Casino Bill To Drive Japanese Stocks Higher Yuan near 20 Year High at 6.0723 per dollar Japan Current Account Shows First Deficit in 9 Months BoJ Kuroda Expresses Confidence on Inflation Target Singpore Riot Highlights Foreign Worker Discontent Indian Congress Party Defeated in Key States Japan New Stimulus Has Roots in Lost Decade Japanese Economy Looking Weaker

WEEK AHEAD

 

* GBP Consumer Price Index
* EUR German ZEW Survey (Economic Sentiment)
* EUR Euro-Zone Consumer Price Index
* USD Consumer Price Index
* USD Federal Reserve FOMC Meeting Begins
* USD Federal Open Market Committee Rate Decision
* USD Fed's Bernanke Holds Press Conference
* NZD Gross Domestic Product
* CAD Consumer Price Index

 

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