The two most-hated currencies in the world are the yen and the British pound.
Here's the story.
Japan's
Britain's currency is falling because the economy is weak, exports are in decline, and it's believed that the incoming Bank of England chief will favor more aggressive monetary policy.
Both have been getting pummeled this year.
And according to Citi's Steven Englander, both have more room to go.
Englander's new now isn't based so much on monetary policy, but on the decline of Japanese and U.K. exports. He says if weaker currencies are going to help return either of these countries to stages of past glory, then there needs to be a lot more decline.
Here's the key chart from Englander. It's a little complicated, but the top part basically just shows the decline in Japanese exports (as a percent of Asian exports in one line and as a percent of Asian exports excluding China in another line) as well as the decline of U.K. exports (as a percent of eurozone exports to outside the UK).
The bottom part shows the U.S. dollar against both currencies.
Citi
Says Englander:
Using export shares as a crude measure of the impact of JPY depreciation on competitors, the likely impact is down by 30-50 percent versus the last episode of yen weakness. Japan is not yet as small as New Zealand in impact, but with such a sharp reduction in regional export importance, a JPY drop just is not what it used to be in terms of impact on the rest of Asia.
For another vivid chart on the lack of momentum in either Japanese or U.K. exports, just check out the trajectory of their exports to the U.S.
Almost everyone exporting to the U.S. over the last decade has seen nice growth. Except it's been total stagnation for Japan and the U.K.
 Citi |
Again, the point? To get competitive again, these countries need A LOT of currency help.