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By HaleStewart March 12, 2015 8:40 am
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A Two Year Comparison of the Yen, Australian Dollar, Loonie, US Dollar, Pound and Euro

     Above is a two-year chart of six major world currencies (the Yen, Australian dollar, Loonie, US Dollar, UK Pound and the Euro) derived from BIS data.  Looking at the short-term trends, we see the following:

  1. The yen is the clear value loser, which was a key component of Abenomics.  The overall value has dropped about 15% over the last two years.  This started quickly about two years ago, with the yen’s value leveling off until the 3Q14 when it started dropping again.  However, this has not had as strong an impact on exports as desired because most Japanese companies have moved their production facilities offshore. 
  2. The loonie has also seen a decrease in value.  There are two downward progressions its line, with the second ongoing.  The Central Bank of Canada recently cut rates in anticipation of weak oil prices hurting the domestic economy.  Overall, the drop has moved from ~102.5 - ~88, or a drop of around 14%.
  3. The Australian dollar has also dropped, with the first move lower occurring in the 1H2013 and the second ongoing.  There are two counter-veiling pressures at work.  Australia still has some of the highest rates in the developing world in conjunction with strong Asian interest in Australian real estate.  On the other hand, the Australian economy is clearly operating below potential, adding downward pressure.
  4. The Pound starter rallying in 2Q13 as traders started to think the BOE was then close to raising rates.  This was also when the UK economy started to print solid growth numbers that, in comparison to the EUs, were impressive. 
  5. Note the Euro’s slight price arc, which printed a slight increase until the beginning of 2Q14 and then started to move lower, with the downward move accelerating over the last few months.  The slight rally in the euro shows the overall psychological impact of Draghi’s “whatever it takes” statement.
  6. And finally there is the dollar, which held steady until last summer.  Since then, it has rallied over 10%.

Hale Stewart is a former bond broker who has been writing about economics and financial markets since 2006 on the Bonddad Blog.  He is also a tax attorney with a domestic and international practice while also forming and managing captive insurance companies for US companies.   You can follow him on twitter at:@captivelawyer  

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