Talking Numbers - CNBC | Yahoo Finance

Sponsored by
Talking Numbers

Is one of the best trades of 2013 also good for 2014?

Talking Numbers

The US dollar gained 21% versus the Japanese yen in 2013. Will it continue in 2014?

Betting on US stocks wasn't the only way investors made money in 2013. One of the big trades of 2013 was buying the US dollar versus the Japanese yen. That yielded a 21% gain in the year that just ended.

While the Japanese yen was weaker versus the US dollar, Japanese equities certainly weren't. The Japanese stock market benchmark Nikkei 225 index closed 2013 up 57%, its biggest climb in over four decades. Even in US dollar terms, the Nikkei was up about 29%, the same as the US benchmark S&P 500 index.

One thing that helped the dollar gain versus the yen – and which also had a role in boosting the US and Japanese equity markets – was action by their respective central banks.

(Read: Dollar near 5-year high vs yen, eyes on US data)

Though the Federal Reserve Bank purchased $85 billion in US Treasury and mortgage bonds per month throughout 2013 as part of its "quantitative easing" monetary stimulus, the Bank of Japan also went on its own buying spree. The BoJ has been spending 7.5 trillion yen per month – about $71.2 billion worth – on assets to propel the Japanese economy. Given that the Japanese economy is about one-third the size of the US economy, the effects of money-printing are even stronger on the yen.

With the dollar relative to the yen, the Nikkei, and the S&P 500 all moving together, what does that mean for investors in 2014?

CNBC contributor Andrew Busch, editor and publisher of The Busch Update, notes that most observers expect another 15% rally in the dollar versus the yen. "If that occurs, we're talking about the Nikkei following along by at least that amount and certainly the S&P being dragged up by at least about half of that," says Busch, who believes there will be at least some correction soon in the S&P 500. "If you believe dollar yen is going to go to 120, you want to be long these two stock markets."

(Read: Global indexes partied in 2013—but EM not invited)

Agreeing with Busch is CNBC contributor Gina Sanchez, founder of Chantico Global.

"Over the last five years, we've seen Japan increase their balance sheet by 82.5%," says Sanchez. "It's starting to show some real results."

Sanchez cites the 5% rise in industrial production coupled with a 1.2% increase in consumer prices last month as examples of the effects of Japan's asset purchase program. She believes the program's continuation will weaken the yen, keep rates lower, and cause investors to take on more risk.

"I think the yen continues to go down from here, especially if you pair that with the fact the Fed is obviously starting to taper," Sanchez says, referring to the US central bank's recent decision to decrease the amount of bonds it will buy each month.

To see more of Sanchez and Busch on what's next for the yen, the Nikkei, and the S&P 500, watch the video above.

More from Talking Numbers:

More bad news ahead for those trying to play gold this way: Strategists
This surprising stock was up 72% in 2013
Why your first move in 2014 should be to sell: Strategists


Follow us on Twitter: @CNBCNumbers
Like us on Facebook:



View Comments (0)

Recommended for You

  • China's rich pimp their planes as jet market takes off

    Shanghai (AFP) - When a Chinese customer asked for the interior of his new Bombardier Challenger 850 jet to be covered with pricey black carbon fibre, the designer was shocked -- but happy to oblige.

  • Obama admin. says health subsidies will continue

    WASHINGTON (AP) — A federal appeals court delivered a potentially serious setback to President Barack Obama's health care law Tuesday, imperiling billions of dollars in subsidies for many low- and middle-income people who bought policies.

    Associated Press
  • What a Marijuana ETF Would Look Like

    The changes taking place around marijuana for medical use and for recreational use are the biggest in almost everyone’s lifetime. There are quite literally billions of dollars up for grabs for those who ...

    24/7 Wall St.
  • CEO: Rivers to quit Clippers if Sterling stays

    LOS ANGELES (AP) — The interim CEO of the Los Angeles Clippers testified Tuesday that coach Doc Rivers told him he will quit if Donald Sterling remains the owner of the team.

    Associated Press
  • We Paid Off $90K of Debt in 4 Years

    One couple went into debt to give their son the education that he needed, eventually owing nearly $90K on credit cards. Here's how they paid it off.
  • U.S. housing turning the corner, inflation creeping up

    By Lucia Mutikani WASHINGTON (Reuters) - U.S. home resales hit an eight month-high in June, suggesting the housing market was gradually regaining momentum and would help the economy to stay on a higher growth path this year. The third straight month of home sales gains, reported by the National…

  • Play

    How to Build Your Own Annuity

    Instead of paying an insurance company, financial advisor Allan Roth recommends building your own "indexed annuity" that protects principal while giving market upside.

    WSJ Live
  • China food scandal spreads, drags in Starbucks, Burger King and McNuggets in Japan

    By Adam Jourdan SHANGHAI (Reuters) - The latest food scandal in China is spreading fast, dragging in U.S. coffee chain Starbucks, Burger King Worldwide Inc and others, as well as McDonald's products as far away as Japan. McDonald's Corp and KFC's parent Yum Brands Inc apologized to Chinese…

  • New India government urges changes to World Bank

    India's new government has called for reforms to the World Bank structure to reflect the "emerging" clout of developing nations in a meeting with visiting bank chief Jim Yong Kim. The government, which took office in May, said in a statement late Tuesday that Finance Minister Arun Jaitley stressed…

  • Goldman Sachs: Here Are 25 Small-Cap Stocks to Buy

    While Goldman Sachs is cautious on small-cap stocks due to valuation concerns, the firm still finds some pockets of opportunity among individual names within the group.

    The Wall Street Journal
  • Herbalife Plummets

    Herbalife shares were down as much as 11%...

    Business Insider
  • Portfolio Analysis: A Cost-Efficient $353,000 Retirement Plan

    My latest portfolio report card is for Mary in Santee, California. She self-manages a 401(k) retirement plan with $353,000 scattered across seven mutual funds and company stock. Before I assign her investment portfolio a final grade, let's examine Mary's portfolio. Still, her retirement plan misses…

    U.S.News & World Report LP
  • Airlines ban flights to Israel after rocket strike

    JERUSALEM (AP) — A Hamas rocket exploded Tuesday near Israel's main airport, prompting a ban on flights from the U.S. and many from Europe and Canada as aviation authorities responded to the shock of seeing a civilian jetliner shot down over Ukraine.

    Associated Press
  • Detroit retirees back pension cuts by a landslide

    DETROIT (AP) — A year after filing for bankruptcy, Detroit is building momentum to get out, especially after workers and retirees voted in favor of major pension changes just a few weeks before a judge holds a crucial trial that could end the largest public filing in U.S. history.

    Associated Press
  • Microsoft CEO, Seeking Growth, Tells Managers to Step It Up

    The day Satya Nadella became Microsoft Corp.'s chief executive officer, he invited several dozen vice presidents to breakfast and had a simple, calm admonition for them: "Can you step it up?" The engineer's tone was a departure from the yelling and wild gesticulations favored by his salesman…

  • Beef pollutes more than pork, poultry, study says

    WASHINGTON (AP) — Raising beef for the American dinner table does far more damage to the environment than producing pork, poultry, eggs or dairy, a new study says.

    Associated Press
  • JetBlue pilot among 6 arrested in Boston drug bust

    BOSTON (AP) — A JetBlue pilot from Florida is among six people arrested by Boston police over the weekend in an investigation of drug dealing incidents near the Boston Common.

    Associated Press
  • Play

    U.S. Stocks Open Lower

    U.S. stocks kicked off the week in a decline, as investors paused following last week's run to record highs. MarketWatch's Victor Reklaitis joins Paul Vigna on the News Hub with the details, plus which stocks to keep an eye on. Photo: Getty

    WSJ Live
  • Rebels release train with bodies from downed jet

    HRABOVE, Ukraine (AP) — Bowing to international pressure, pro-Moscow separatists released a train packed with bodies and handed over the black boxes from the downed Malaysia Airlines plane, four days after it plunged into rebel-held eastern Ukraine.

    Associated Press
  • Top Analyst Upgrades and Downgrades: Apple, ARM, DaVita, GE, GoPro, Itron and Many More

    These are the top analyst upgrades, downgrades and initiations from Wall Street firms on Monday, July 21, 2014. They include Apple, ARM Holdings, DaVita Healthcare, General Electric, GoPro and Itron.

    24/7 Wall St.