Sumitomo Mitsui’s strategist Daisuke Uno apparently correctly predicted that the dollar would fall below 100 yen post-Lehman.
Now he’s predicted that the greenback will almost halve to 50 Yen next year from near 90 today. What’s his logic?
Bloomberg: The greenback is heading for the trough of a super-cycle that started in August 1971, Uno said, referring to the Elliot Wave theory, which holds that market swings follow a predictable five-stage pattern of three steps forward, two steps back.
The dollar is now at wave five of the 40-year cycle, Uno said. It dropped to 92 yen during wave one that ended in March 1973. The dollar will target 50 yen during the current wave, based on multiplying 92 with 0.764, a number in the Fibonacci sequence, and subtracting from the 123.17 yen level seen in the second quarter of 2007, according to Uno.
Always nice to see analysts swinging for the fences, should it actually happen he’ll be a superstar. Yet at the same time, Japan would likely be killed by such a scenario as the resulting huge drop in export competitiveness would allow the U.S. to hollow out its manufacturing base, plus that of likely many other nations.
One imagines that other economic forces would adjust first to a weakening dollar, as a counterbalance, before such a move to were possible. But hey, never say never.