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By way of background, I do not trade currencies, but am exposed through my day
job.
I work for a large multinational company with significant hedging operations.
The co. has a staff of PHD economists and high level contacts in global
banking.
Here is what they think:
Intervention in market was for benefit of China. China has been holding the
line on devalueing but is starting to feel significant pain internally--actual
internal growth is significantly below official numbers. Speaking with some
the Chinese nationals that work for our firm...China will take a lot of
internal pain before it devalues. Trying to stabilize region, show it is a
leader...However, can only absorb so much pain...particularily if Japan is
doing nothing. Their opinion, China will not devalue, but probability for
possible devaluation is higher now than couple months ago. If China does
devalue--another round of devaluations throughout region.
Japan--Yen will continue to weaken...One projection is for Yen/$ to hit 170
within 12 mos.!! A couple high level international money managers believed
that possible we'll see 200 in 24 mos.!! I almost fell out of my
chair...Internally, our economist think the 200 level is very unlikely--G7
will not allow it.
Longer-term, region will recover...take several years. Great buying
opportunity for companies to pickup some assets--need deep pockets and staying
power.
Unrelated/related topic--increasing concern re: Brazil.
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