Friday, June 15, 2007
Loonie Flies North vs. Yen
A 20% straight-line move for a major currency cross in just 70 trading days is a BIG event. Such has been the stellar move of the Loonie versus the YEN. Fascinating to say the least. And seemingly the farthest thing from the typical stuff Brownian Motion type behaviour that's characterized recent action of the FX majors.
OK, so maybe the Loonie isn't a major. And at the risk of being immodest, I've gone on record as a big fan of the Loonie (See Dec post of "Cassandra's Xmas Presents to You). But there is something unreal, and seemingly non-random about such incremental, straight-line unidirectional moves depicted above. Detecting non-randomness is highly prized in my book, for once detected, one can set about to game it (provided it is of course truly non-random, and not mere coincidence masquerading as such).
And maybe this is less about the loonie, than it is about the YEN. For I still like the Loonie, know that it is coming from a prolonged period of market-mis- and under-valuation, and do think it will eventually break on through to the other side of parity vs. USD. That notwithstanding, there IS a mega-divergence at-hand between the direction of this particular cross and its rate of change (see chart right), and it should be noted that we are rapidly approaching the end of the quarter, which coincidentally coincides with quarterly accrual and crystallization of incentive fees, and thus may serve as an intermediate term endpoint for this less-than-likely move. In any case, the days of derogatory remarks about the "Northern Peso" are long gone, and soon US dollar-holders south of the Canadian border may wish they were paid in, and holders of, BOTH northern, and southern pesos. But there is still time before THAT chapter will be written...