The yen versus the dollar

At just under Y86 to the $, the yen remains close to its recent high of Y84.7, the highest it has been in 15 years. Surprisingly some economists are forecasting a further rise despite attempts by Japanese officials to talk the currency down last week. This morning’s 2Q GDP figures showed minimal real growth and another fall in nominal GDP. The last thing the Japanese economy needs is a further rise in the currency. Sadly, what is driving these forecasts is analysts’ bearishness on the U$ and resulting predictions for a fall in the dollar. What they fail to see is that Japan needs a fall in the yen far more than the US needs a fall in the $.

Gloom and doom is the order of the day for the US economy. Whether that is justified is another matter. The ECRI weekly leading index, which correctly forecast the current slowdown in the economy, reached its low point in early July and has now turned up again. This is not to say that the US economy is out of the woods, but it does suggest that the bearishness on the dollar is overdone.