International Financial Outlook by Lloyds TSB

Uncertainty continues to reign in foreign exchange rate markets. At the same time, the misalignment in some currencies, and the implied scope for adjustment makes for the possibility of some quite dramatic moves once they begin. Uncertainty continues to reign in foreign exchange rate markets. At the same time, the misalignment in some currencies, and the implied scope for adjustment makes for the possibility of some quite dramatic moves once they begin. Take for instance the yen, after being considered as undervalued for some years against the US dollar it is now considered as being overvalued. But the relentless rise continues, even though it risks imparting serious damage to the prospects for Japanese export-led economic growth in the years ahead. Questions persist about the direction of the USA dollar, the euro, sterling and the Chinese currency for different reasons. What this potentially adds up to though is a scenario where a reduction in uncertainty could lead to quite severe financial markets volatility in the year ahead.

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