Eighteen months ago I drew a schematic to show how FX performance changes over time, arguing on the basis of valuations, BOP trends and business cycle divergence that we were moving back into a regime where the broad dollar would lose its positive correlation with risk aversion and USD/JPY reemerge as the ultimate high-beta play (Simple shapes to avoid headaches, 8 March 2012, the charts from which are reproduced below). Three points bear reiterating in light of Japanese policy shifts, proximate Fed tapering, European stabilization, slower Chinese growth and renewed tension in the Middle East.
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Deutsche Bank