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FX Pro: Forget The Fed And Brexit, Focus On Japan

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FX Pro: Forget The Fed And Brexit, Focus On Japan

Daniel Katzive is head of foreign exchange strategy for BNP Parisbas' North American unit and was a guest on CNBC's "Markets Now" segment on Wednesday to discuss why investors need to pay a lot more attention to ongoing developments in Japan.

Katzive started off by stating that it is "premature" to call the bottom in the British pound. Furthermore, ongoing questions surrounding the country and its economy following the "Brexit" vote won't be answered for a few years.

He continued that the British pound needs to weaken further to attract large amounts of foreign investments. Meanwhile, the Bank of England is talking about lowering interest rates, renewing or adding to its quantitative easing program in the near term.

Related Link: Japanese Investors Begin Taking On Exposure To Foreign Currency Debt

All of these factors will continue putting pressure on the pound which already dipped below his near-term target of $1.30 per U.S. dollar.

Meanwhile, the market has "taken out any possibility" of the Federal Reserve announcing an interest rate hike in the near term. The market is also expecting incremental easing from other central banks of major economies worldwide.

The pro suggested that the Bank of Japan is definitely the central bank investors need to follow a lot closer following the recent strengthening of the yen and falling expectation for any rises in inflation.

As such, it "makes sense" for the Bank of Japan to take action at the end of the month if not sooner.

A Few Related Stocks

  • iShares MSCI Japan ETF (NYSE: EWJ): Down roughly 3 percent over the past month.
  • Guggenheim CurrencyShares Japanese (NYSE: FXY): Up roughly 6 percent over the past month.
  • WisdomTree Japan Hedged Equity Fund (NYSE: DXJ): Down roughly 12 percent over the past month.
 

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