USD v. JPY
Aug 18, 2007 | 2:50 am
#17
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Aug 18, 2007 | 6:12 am
#18
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When it comes to exchange rates, I prefer to digest mine as burgernomics:
http://www.economist.com/markets/Bigmac/Index.cfm
According to Big Mac theory, the yen's fair value is around 82 to the dollar, so at 122:1, it was considered 33% undervalued -- the world's most undervalued currency, at that. A reversal has been long overdue, and while I don't think we'll see 82:1 anytime soon (unless the dollar really collapses!), it's worth remembering that it's only been a little over two years since the yen was almost at 100:1...
http://www.economist.com/markets/Bigmac/Index.cfm
According to Big Mac theory, the yen's fair value is around 82 to the dollar, so at 122:1, it was considered 33% undervalued -- the world's most undervalued currency, at that. A reversal has been long overdue, and while I don't think we'll see 82:1 anytime soon (unless the dollar really collapses!), it's worth remembering that it's only been a little over two years since the yen was almost at 100:1...
Aug 18, 2007 | 7:38 am
#19
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When it comes to exchange rates, I prefer to digest mine as burgernomics:
http://www.economist.com/markets/Bigmac/Index.cfm
According to Big Mac theory, the yen's fair value is around 82 to the dollar, so at 122:1, it was considered 33% undervalued -- the world's most undervalued currency, at that. A reversal has been long overdue, and while I don't think we'll see 82:1 anytime soon (unless the dollar really collapses!), it's worth remembering that it's only been a little over two years since the yen was almost at 100:1...
http://www.economist.com/markets/Bigmac/Index.cfm
According to Big Mac theory, the yen's fair value is around 82 to the dollar, so at 122:1, it was considered 33% undervalued -- the world's most undervalued currency, at that. A reversal has been long overdue, and while I don't think we'll see 82:1 anytime soon (unless the dollar really collapses!), it's worth remembering that it's only been a little over two years since the yen was almost at 100:1...
Marc
Aug 21, 2007 | 6:44 am
#20
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According to an article in the latest Economist, institutional investors are indeed starting to unwind some carry-trade positions. The NZ$ is reportedly weakening dramatically relative to the yen. But the legions of Watanabe-sans (a new term for my eyes, apparently a reference to the "soccer moms" of Tokyo who invest family savings) have not started unwinding their own, often highly leveraged, carry-trade positions. If and when they do, the yen will gather yet more strength as they dump foreign currencies and re-purchase yen. Not good at all for dollar-earners spending yen. 
Aug 21, 2007 | 8:58 am
#21
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According to an article in the latest Economist, institutional investors are indeed starting to unwind some carry-trade positions. The NZ$ is reportedly weakening dramatically relative to the yen. But the legions of Watanabe-sans (a new term for my eyes, apparently a reference to the "soccer moms" of Tokyo who invest family savings) have not started unwinding their own, often highly leveraged, carry-trade positions. If and when they do, the yen will gather yet more strength as they dump foreign currencies and re-purchase yen. Not good at all for dollar-earners spending yen.
We're also looking forward to the Yen returning to more reasonable levels, although that might spell trouble for the economy as a whole (see this other Economist article).
Aug 21, 2007 | 9:13 am
#22
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There was a time during the early 1990s when the yen actually went above 100 yen = US$1.
As one who works for Japanese clients and gets paid in yen, I'm happy to see the yen rise. It's been tough lately with the undervalued yen.
Even with the higher yen, Tokyo is still not outrageously expensive. One of the best things about Japan is that you can go quite far into the low-price ranges and still not have to worry about cleanliness or safety. An 8000 yen single in a business hotel will be small and Spartan, but there will be no mold in the bathrooms or drug addicts in the hallways. A 1000 yen lunch in the basement of an office building is quite affordable.
As one who works for Japanese clients and gets paid in yen, I'm happy to see the yen rise. It's been tough lately with the undervalued yen.
Even with the higher yen, Tokyo is still not outrageously expensive. One of the best things about Japan is that you can go quite far into the low-price ranges and still not have to worry about cleanliness or safety. An 8000 yen single in a business hotel will be small and Spartan, but there will be no mold in the bathrooms or drug addicts in the hallways. A 1000 yen lunch in the basement of an office building is quite affordable.
Aug 21, 2007 | 10:56 am
#23
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My tongue was ever so slightly in my cheek when I posted the previous reply, but...
That would actually strengthen the yen in comparison, so if they increased prices and the burger is still cheaper, then it's really undervalued.
FWIW, the latest burger index dates from July 5th and gives a Big Mac's price as Y280 (= $2.29), compared to an average of $3.41 in the US, thus making the yen 33% undervalued.
FWIW, the latest burger index dates from July 5th and gives a Big Mac's price as Y280 (= $2.29), compared to an average of $3.41 in the US, thus making the yen 33% undervalued.
Last edited by jpatokal; Aug 22, 2007 at 5:57 am
Aug 21, 2007 | 4:07 pm
#24
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its getting back. Back to114.3. Its probably best not to rely on any currency forecasts. Just last month the talk was a 120-124 range. I like a 112-115 range, just a personal "fair value" calculation.
Aug 21, 2007 | 7:39 pm
#25
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The least credible of all forecasters are the investment bank currency analysts and traders. I don't even know why they bother saying anything, they're always wrong, not just a "little off" but very often directionally incorrect. They must be earning their keep some other way, because if they did so on forecasting, I'd rather pay Smidgen to raise his left paw if the yen is to appreciate, and his right paw if it is to depreciate. I'm sure his accuracy would be better than that of the talking heads.
Aug 22, 2007 | 4:09 pm
#27
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The least credible of all forecasters are the investment bank currency analysts and traders. I don't even know why they bother saying anything, they're always wrong, not just a "little off" but very often directionally incorrect. They must be earning their keep some other way, because if they did so on forecasting, I'd rather pay Smidgen to raise his left paw if the yen is to appreciate, and his right paw if it is to depreciate. I'm sure his accuracy would be better than that of the talking heads.
Aug 23, 2007 | 6:51 am
#28
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The culture of short-term institutional greed in the US appears to be alive & well. Financial companies are stepping in to buy discounted stakes in the high-risk loan companies.
The sub-prime mess isn't completely over & (IMHO) it's just a matter of time before the results of this scare will be evident in the US economy. Until then, I step back from my 110 prediction for this week.
The ¥/$ exchange will stabilize back in the 114-116 range and stay there until the ripples from the liquidity mess start taking hold. Maybe in the 6 month - one year timeframe, but who knows?
The sub-prime mess isn't completely over & (IMHO) it's just a matter of time before the results of this scare will be evident in the US economy. Until then, I step back from my 110 prediction for this week.
The ¥/$ exchange will stabilize back in the 114-116 range and stay there until the ripples from the liquidity mess start taking hold. Maybe in the 6 month - one year timeframe, but who knows?