The central banks policies and govt policies, announced and unannounced, and agreements, as in 1980s, play a big role in currency moves. The latest example is Japanese Yen. However, speculators and momentum players (trend followers) are the primary drivers of trends that last several years until extremes, not justified by economic fundamentals, are reached and reversals follow.

The most recent example of the extreme was in Swiss franc that reached a level on 08/09/2011 that was completely unjustified by any fundamentals and was a result of scare tactics by charlatans who claimed that the dollar would become worthless as a result of the fed "printing money," a propaganda lie. My view for the past three years has been that the USD was grossly undervalued against most currencies and with the benefit of hindsight a low in the dollar index was made on 05/02/2011, as can be seen in Figure 1.

Trade Weighted US Dollar Index

Table 1 below shows the duration of the trends and magnitude of the move for each trend in the form of ratio from the high to low:

My forecast for DXY is a high in the range of 100-110 some time during 2016-2018, in a period characterized by a global depression as central banks fail in their efforts to manipulate the economies to their liking based on a bad economic theory and wishful thinking.

By Jas Jain , Ph.D.

the Prophet of Doom and Gloom

Copyright © 2014 Jas Jain - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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