Global Markets Update: Watch Yen Crosses; + Mozambique Emerging As Power Player

The Bank of Japan (BoJ)’s accelerated easing programme has sent the yen sharply lower, and as logic would suggest, the recent move in JPY/EUR in the euro’s favour matches the move in the ratio of the BoJ’s balance sheet to that of the European Central Bank (ECB).

Similar charts can be seen for JPY/US$ and JPY/GBP, although the relative balance sheet move is slightly more pronounced for the ECB, whose assets have been contracting for months, as some of its liquidity assistance programmes recede. While a large move has already occurred, the BoJ’s doubling of monthly purchases beginning in May (to JPY7.5trn) suggests that this ratio can go further, and potentially much further.

This led us to look at long-term yen crosses, which are showing staggering potential for further upside, and the sky is the limit for yen weakness, technically at least. Sterling-yen looks like it can go to JPY200.00/GBP in the quarters to come, from JPY153.00/GBP at present. Absent a move lower in sterling versus the US dollar, this would imply a dollar-yen exchange rate of JPY133.00/US$. While this is hard to imagine at this point, the technical outlook seems bleak for the yen indeed. Beyond JPY200.00/GBP, there is little support until JPY250.00/GBP. We will be watching these charts closely for future direction, as they may be spelling a severe dislocation in Japanese (and by extension global) markets.

Mozambique Emerging As Regional Power Player

Elsewhere on Business Monitor Online, we examine Mozambique’s role as an emerging power hub for southern Africa. The country is looking well positioned for this role, owing to its already high total installed capacity (relatively speaking compared with its African peers), the projected robust growth in power demand over the coming decade, and the reasonably strong coal, gas, and hydropower plant project pipeline. That said, there are still a number of risks that are likely to delay these expansion plans, such as the government’s unwillingness to fully liberalise the power sector, and feedstock-related issues. There are also security risks. The first week of April 2013 saw attacks blamed on rebel group-turned-opposition party Renamo, which could threaten recent political stability.

This Week’s Trivia Question

Last week, we asked, which currency has apparently doubled in value against the US dollar over the past six months, due to a big influx of funds from expatriates? The hint was that the country is recovering from a long period of conflict. The answer, interestingly enough, is the Somali shilling, as explained in this Al Jazeera clip.

This week, we are sticking with the theme of Somalia. Our questions are, which relatively famous Somali played a character that tried to kill Captain Kirk in one of the later Star Trek films? And, on a semi-related note, which short-lived US TV series of recent years had an episode in which one of its main characters, who was played by an actor who plays a colleague of Captain Kirk elsewhere, visits a remote region of Somalia? (Hint: the actor was born in a country that is currently being threatened with war by its much poorer neighbour.)