“It’s not persuasive that the US economy is tanking,” says Stephen Jen, head of hedge fund SLJ Macro Partners. “The dollar is still a very clear trade: it is a play on economic divergence.”
Archive for October, 2014
The ECB is relying on a weaker euro as its main defence against deflation but Japan’s travails shows that this is a risky strategy without powerful action to back it up. Stephen Jen from SLJ Macro Partners said it will take very large outflows of capital to offset the eurozone’s current account surplus of €230bn, and then to push the exchange rate down to €1.20 against the dollar, the minimum level needed to kick start a recovery. “If the ECB’s actions are too weak, the euro could perversely appreciate, just as the yen did from 1990 to 2012,” he said.