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12/19/2012

And the winner for the best major currency depreciation for economic growth and Stock Index appreciation?  It’s not the EUROZone….it’s not the US…it’s that third largest economy out there…Japan !!

You’ve heard the battle between the US and EUROZone to get the weaker currency to spur export growth, but there has been a clear cut winner in this odd race.  That good old island nation registering 3rd largest on the planet…Japan.  Despite its anemic economic growth rate in 2012 with Q2 nearly flat and Q3 declining some 0.9%, this mover and shaker managed to devalue its currency via the US$ some 8% over the past weeks and even weaker via the EURO.  One of the positives of this currency move has been an impressive, roughly 10% appreciation in the NIKKEI index over the same time horizon…despite the anemic economy and negative future prospects for real growth.

No wonder the battle of the other majors to spur export growth by weakening their currencies…for some odd reason, equity traders love it.  Case in point with the US$ falling a couple of percent via the EURO over the past few trading sessions and the major US stock indexes surging higher…..what a strategy (and you thought it was positive comments regarding the fiscal cliff causing stocks to go higher) !!  So what’s the catch ?

The catch is that with a focus of the major developed economies to export their way to stability…there needs to be an importer somewhere.  Importer ?  Anyone, Beuller, anyone?  Hey, if you get some stock gains into year end…Merry Christmas !! just be careful into 2013.

 

Stephan Kudyba (MBA, PhD)                      THE MARKET DOCTOR

 

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