Sure, European economic growth is decelerating. But mind you, over the first quarter, the US economy looked pretty much ''touch and go'' as well. Despite the economic ugliness in the US over recent months, investors seemed happier to place their bets on the greenback than the euro. As I said, all roads these days lead to Washington, and the US has become the economy ''too big to fail''. Meanwhile, the yen has strengthened, which may seem more than a little odd given the parlous state of the Japanese economy - where industrial production registered a bigger than expected contraction of 1.7 per cent for April, as well as the persistent weakness in industrial production, and business and consumer confidence.
Japan appears to be slipping back into recession.
It has been suggested that many fund managers had underweight positions in the yen to offset long positions in the euro. Hence, a sell-off in the euro was behind the recent surge in the yen. Some Japanese investors may have also sold off their euro positions and repatriated funds. South China Morning Post Publishers Ltd. All rights reserved.