WEBVTT - SG's Juckes Says USD/JPY Could Easily Trade Down to 100 (Audio)

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<v Speaker 1>three percent. And that's a Bloomberg business flash. You're listening

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<v Speaker 1>to taking Stoff with Kathleen Hayes and Pim Fox on

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<v Speaker 1>Bloomberg Radio. Today. The president of the Federal Bank of Dallas,

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<v Speaker 1>Robert Kaplan, said he supports the FED moving at a

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<v Speaker 1>gradual place. Depending on the economy, that pace could be

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<v Speaker 1>faster or slower towards more interest rate increases. Well, the

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<v Speaker 1>currency market is betting that after the government reported a

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<v Speaker 1>first quarter GDP growth rate of just zero point five percent,

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<v Speaker 1>that interest rates are a long way off, and that's

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<v Speaker 1>one of the reasons that the Fed continues a three

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<v Speaker 1>month drop. Joining us now to sort this all out

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<v Speaker 1>for the currency market. Kitch you Global Strategistics Society General

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<v Speaker 1>in London, Kit, welcome back. Hi. Well, you know, the

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<v Speaker 1>Fed keeps saying one thing, although I think in fairness

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<v Speaker 1>to Rob Kaplan. He didn't say that there was going

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<v Speaker 1>to raise raids in June or you know, any time,

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<v Speaker 1>except that they will at some point. But the dollar

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<v Speaker 1>seems to me is it responding as much to the

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<v Speaker 1>just the weakness in the economy and the power of

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<v Speaker 1>that message. Um, I think it's reacting partly to a

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<v Speaker 1>sluggage economy for sure, but possibly even mortally the FEDS

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<v Speaker 1>emphasis at the moment on giving the economy a chance.

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<v Speaker 1>I'm turning around and saying that even as market measures

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<v Speaker 1>of inflation expectations have been edging a little bit higher,

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<v Speaker 1>as wage growth has even picked up a little bit,

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<v Speaker 1>and you know recently, um, that they're really not bothered.

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<v Speaker 1>I think that was one of them, you know. So

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<v Speaker 1>there were two messages from the Fed in the middle

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<v Speaker 1>of the week. One is, yeah, you know, we're not ready.

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<v Speaker 1>The economy is just trundling along. And the second was

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<v Speaker 1>we think we think in patient rely measures pressures a

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<v Speaker 1>very absent and that means we're not in a hurry.

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<v Speaker 1>So you have you have a market that's pricing forward

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<v Speaker 1>expectations of inflation higher, a central bank that doesn't care,

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<v Speaker 1>and a dollar that's going down. Kit chukes. Can you

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<v Speaker 1>tell us who are the people who are the big

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<v Speaker 1>players in the foreign exchange market. The foreign exchange market

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<v Speaker 1>doesn't move by itself. It's got people behind it. Who

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<v Speaker 1>are they? I think that there's been a there's been

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<v Speaker 1>a mad rush of all sorts of people to benefit

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<v Speaker 1>from the strong dollar in the last I guess the

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<v Speaker 1>last eighteen months or so, so European investors who have

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<v Speaker 1>been buying US as that European investors who have been

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<v Speaker 1>going short of the short of the of the urosay

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<v Speaker 1>and long of the dollar when the European Central Band

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<v Speaker 1>moves negative reds. There have been certainly an enormous number

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<v Speaker 1>of the kind of leverage trading community, the edge one community,

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<v Speaker 1>who have had a long dollar that as part of

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<v Speaker 1>the gloomy assessment of the global economy and a trade

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<v Speaker 1>on a trade on monetary policy diversions. You've had a

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<v Speaker 1>lot of hedging from the corporate sector, for whom a

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<v Speaker 1>strong dollar is certainly a concern. If you're an American

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<v Speaker 1>corporate selling products overseas, you have been hedging pretty much

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<v Speaker 1>having you can in the currency in case the dollar rises.

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<v Speaker 1>So it's it's companies, it's hedge funds, it's traders and

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<v Speaker 1>it's people managing pension funds all over the world, but

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<v Speaker 1>too many of them with one trade the same way

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<v Speaker 1>around for sure. When we look back at the last

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<v Speaker 1>few months, So kit uh, the bigger Japan did not

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<v Speaker 1>cut its negative rates even more negative the bigger Japan.

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<v Speaker 1>Mr Krona wants to give the recent moves a chance

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<v Speaker 1>to work. How has that played out in the currency market?

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<v Speaker 1>What does it mean moving ahead? Because one of surprises,

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<v Speaker 1>of course, has been the strength in the end. Even

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<v Speaker 1>with Japan, we've been to a negative rate policy. Yeah,

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<v Speaker 1>I mean, I think they botched their move to negative

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<v Speaker 1>rates at the end of January. The the negative rate

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<v Speaker 1>policies intended to encourage people to invest overseas. Japanese investors

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<v Speaker 1>were invested overseas over enthusiastic be already and in January

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<v Speaker 1>when markets were melting down, they couldn't do much more

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<v Speaker 1>and that that started this off. Um, you know, either

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<v Speaker 1>they've made a policy mistake and they just need to

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<v Speaker 1>wait for the for the dust to settle, or they've

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<v Speaker 1>they've made a policy to negative rates and they want

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<v Speaker 1>to wait and see how it does, how it works,

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<v Speaker 1>and their more adult calm and grown up and fools

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<v Speaker 1>like me and my like in the market. That's that's

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<v Speaker 1>possible too. But either way they may well get dolly

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<v Speaker 1>yen a lot closer to a hundred pliant of time

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<v Speaker 1>they're done. Um, the yen is strengthening. There's a resistance

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<v Speaker 1>at the moment of reluctance to intervene in the foreign

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<v Speaker 1>exchange markets. Um. That that's that's not something that people

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<v Speaker 1>are keen to do at the moment, sort of fuel

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<v Speaker 1>the talk of currency wars. Um. And I think they're

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<v Speaker 1>just they're just sitting it out for a bit. But

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<v Speaker 1>that the danger is, you know that buying the yen

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<v Speaker 1>is the new big thing, just as I don't know,

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<v Speaker 1>buying all sorts of other things has been in time.

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<v Speaker 1>So we're going to overshoot. I don't know how to

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<v Speaker 1>cope with an overshoot to you know, to a hundred

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<v Speaker 1>dollar yen, which is another seven per cent or so

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<v Speaker 1>from here. You know, do I buy the yen or

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<v Speaker 1>do I wait to tell the end there? Or do

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<v Speaker 1>I just go and have a long weekend, which I'm

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<v Speaker 1>getting here now. And maybe maybe it's got a t

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<v Speaker 1>or is something more that starts with than m possibly

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<v Speaker 1>kit speak if you can about the investors that may

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<v Speaker 1>be trapped in a long dollar trade now unwinding to

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<v Speaker 1>go to a long Japanese yen trade. Will they get

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<v Speaker 1>trapped there too? Um? Some of them, I think. I

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<v Speaker 1>think the rush into the yen at the moment has

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<v Speaker 1>been um. Short term traders. I think you've got some.

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<v Speaker 1>I think if you've had a balance of people in

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<v Speaker 1>the world, you have some long term investors who are

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<v Speaker 1>still shortly en um, and you have some short term

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<v Speaker 1>investors who are along the n and the short term

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<v Speaker 1>investors are moving us right now. I think some of

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<v Speaker 1>them may be fact. I mean, you know, not a

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<v Speaker 1>lot of people have been gods of trading in this

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<v Speaker 1>market in the last three months. It's been a very

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<v Speaker 1>difficult start of the year with with with trends breaking

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<v Speaker 1>up and moving quite violent the other way. So I

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<v Speaker 1>would expect several people, you know, plenty of people, more

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<v Speaker 1>people than I can count, will well, we'll find that

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<v Speaker 1>they can't manage the full in doll again and then

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<v Speaker 1>the subsequent bands and um, and you know, I don't

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<v Speaker 1>think we could. We could easily trade down near a

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<v Speaker 1>hundred and up near a hundred and twenty old before.

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<v Speaker 1>I don't know if you're like the fourth of this right.

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<v Speaker 1>Thank you very much at Kit Juke's Global strategy Associate General.

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<v Speaker 1>The end right now trading at one oh six to

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<v Speaker 1>the dollar, Eurospot one fifty, and the British pound at

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<v Speaker 1>one forty six. Japanese yends gained eleven percent against the

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<v Speaker 1>US dollars since the beginning of the year. You're listening

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<v Speaker 1>to taking stock on Bloomberg Radio China's economy. What do

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<v Speaker 1>you really need to know and how much can we

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<v Speaker 1>trust the economic statistics out of China. Coming up on

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<v Speaker 1>Bloomberg Radio, we're going to tackle that question and more.