by Pater Tenebrarum, Acting-Man.com:
An Air of Inevitability
One thing recent years have shown is certainly that currency markets have a tendency to overshoot and trend very consistently in the same direction. Sentiment and positioning analysis has in some cases failed to work with unwavering regularity. In fact, it didn’t even help much if fundamentals were not necessarily in line with the trend – the yen being a prime example. Sentiment and positioning on the yen were at extremes for a long time, and while the BoJ has enacted an unprecedented “QE” operation, Japan’s actual money supply growth has remained fairly tame. Not only that, according to John Hussman, the yen is now the most undervalued major currency on a purchasing power parity basis as well (note though that we are a bit wary of such data – how one can reasonably calculate PPP is hard to fathom given the vast array of prices in the economy).
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