Archive for March, 2015

FT: Risks of following the crowd on dollar and yuan

“If there is consensus on any single trade these uncertain days, it is that the dollar will continue rising, up 23 per cent since June, albeit with some volatility. Equally, there is agreement that an ascendant dollar will only aggravate the negative circumstances of emerging markets.

“2015 may turn out to be the year of localised emerging market currency crises,” notes Stephen Jen of SLJ Macro in London.

Read the original article on the ‘FT’ website.

WSJ: Dollar Watchers Look to IMF

“It is quite likely that central banks will continue to divest from the euro,’’ said Stephen Jen, managing partner at money manager SLJ Macro Partners LLP in London. “The main reason is that negative yields are a turnoff for central banks.”

Mr. Jen, a former economist at the IMF and the Fed, said that while safety and liquidity trump returns for central banks when they allocate their foreign-exchange reserves, it doesn’t make sense for reserve managers to hold negative-yield assets because it is punitive.

Mr. Jen says he expects the euro to fall to $1 as soon as May or June.

Read the original article on the ‘WSJ’ website.

Bloomberg: U.S. Founding Father Invoked as China Debates $4 Trillion Debt Pile

“The PBOC is the Bundesbank of EM,”‘ said Stephen Jen, co-founder of SLJ Macro Partners in London and a former International Monetary Fund economist. “It is conservative and does not have the mindset of the Fed: print money to stimulate aggregate demand.”

Read the original article on the ‘Bloomberg’ website.

The Telegraph: Global finance faces $9 trillion stress test as dollar soars

“The world is on a dollar standard, not a euro or a yen standard, and that is why it matters so much what the Fed does,” said Stephen Jen, a former IMF official now at SLJ Macro Partners.

He says the latest spasms of stress in emerging markets are more serious than the “taper tantrum” in May 2013, when the Fed first talked of phasing out quantitative easing.

“Capital flows into these countries have continued to accelerate over recent quarters. This is mostly fickle money. The result is that there is now even more dry wood in the pile to serve as fuel,” he said.”

Mr Jen said Asian and Latin American companies are frantically trying to hedge their dollar debts on the derivatives markets, which drives the dollar even higher and feeds a vicious circle. “This is how avalanches start,” he said.

Read the original article on the ‘The Telegraph’ website.