Nikkei to rally +30% in 2014: The Nikkei 225 has an almost perfect correlation (0.98) to the USD/JPY cross

David Allingham

Nikkei to rally +30% in 2014: The Nikkei 225 has an almost perfect correlation (0.98) to the USD/JPY cross. As the JPY weakens against the USD the Nikkei rises, but with 2x the leverage. That is, for every 1% depreciation of the JPY the Nikkei rises around 2%. To put it in context, the USD has risen 27% versus the JPY since Sept12 and the Nikkei has risen 60% over the same time. So, is the JPY going to continue its decline? With the reduction in US QE in parallel with an acceleration of QE from The BOJ (expected in April next year) the market is forecasting a USDJPY of 110-115 in 2014. If these forecasts prove correct the Nikkei can rally +30% in 2014. How to get exposure: Platinum Japan Fund or to hedge out the currency exposure buy NYSE listed DXJ:US (Wisdom Tree Japan Hedged Equity Fund).


David Allingham

David Allingham completed a Bachelor of Commerce Degree at the University Sydney in 2000. David joined Eley Griffiths Group as Dealer in October 2004. He has been fulfilling the role of Analyst/Portfolio Manager at Eley Griffiths Group since 2006.

Expertise

usd nikkei forex

Comments

Please sign in to comment on this wire.