Bill Gross, Manager of Pacific Investment Management Co., the biggest bond fund in the world, stated that Yen, the major Japanese currency is most likely to go down to 100 per USD on the increasing concern that Bank of Japan will take further measurements in an attempt to debase Yen. Gross stated a lot of printing of Yen is expected to be seen and the investors should be avoiding such a currency that prints so much, thereby endorsing the quantitative easing to its fullest possible extent.
In the last 6 months, Yen has declined by 16%. The current Prime Minister of Japan, Shinzo Abe, pushed for stern monetary policy for weakening the currency and defeating the deflation, after taking the office in last December. Some analysts of Mizuho Securities & Nomura Holdings currently forecast that the Bank of Japan may add to monetary stimulus pretty soon, even before the policy meeting to be held between 3rd and 4th April.
Apart from Yen, according to Gross, Pound will also go down thanks to the quantitative easing policy. Incidentally, quantitative easing is a policy of buying assets like bonds for increasing the money amount in a particular financial system. Till February, Pound has lost around 6.7% against USD, thereby touching its weakest level in the last 3 years. Despite such low prices, Pound is still considered to be overvalued by 2.3%, as far as the statistics of an Organization for Economic Cooperation and Development measure is concerned. It should be noted that if the currency weakens, the exporters’ competitiveness is increased as the imported goods become costlier.
Gross commented that if investors are looking for relative strength, they should have a look at Euro or USD. Gross reiterated that Real, the major currency of Brazil, is still the most preferred one for him. He even asked investors to refrain from putting money into US Treasuries which are set to mature in the next 10 and 30 years. According to Gross, the currency market is turning closer to irrational exuberance, however, not completely irrational yet.
On Today, however, Yen gained slightly (0.1%) against USD and is priced at 93.35 per greenback. Incidentally, the last time when Yen traded at 100 per USD was in April, 2009 and many feel that it will go down to 95 per USD by end of 2013.