Archived IMT (2010.10.13)

REVISITING CNY/JPY. Take a look at this WEEKLY chart of CNY vs JPY http://chart.ly/rvwndk9 , which fell nearly 25% over the last 2 years. Japan has all the right to be upset with the yuans weakness, but we all know that yen strengthening has broadened against all major currencies over the same period. Only an outright yuan revaluation (unlikely) will help stabilize CNY/JPY, which would occur via rising global appetite and a falling yen. Any further TIGHTENING of CHNESE MONETARY POLICY would only extend CNY/JPY further down, likely calling up 11.0 yen by Q1. This leaves us with powerful and effective BoJ easing/intervention as the only way to reverse this currency pair, which today, remains unlikely with the conservative 5 trillion yen in allocated asset purchases.