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Short Dollar and Yen as 'Currency Wars' Continue: Strategist

Matt Clinch, News Assistant
Friday, 28 Dec 2012 | 7:31 AM ET

As central banks in both the U.S. and Japan look set to continue aggressive monetary easing policies in 2013, Dan Harden, senior commercial dealer at Global Reach Partners has told CNBC traders should short both countries' currencies and look for high yields from the Australian and New Zealand dollar.

Don Farrall | Photographer's Choice RF | Getty Images

On December 12 Federal Reserve Chairman Ben Bernanke announced another round of quantitative easing to the tune of $45 billion a month. Tied with new Japanese Prime Minister Shinzo Abe's stance on pumping cash into its economy, the depreciation of both the dollar and the yen looks set to continue.

"It's a tug of war at the moment, they're talking currency wars," Harden said.

"The Fed and the Bank of Japan both easing and trying to devalue their currency - at the moment the Japanese are winning."

Abe and his Liberal Democratic Party have announced their intention to use policy to tackle deflation. Their hand may soon be forced.

Japanese factory output figures on Friday showed a steep fall of 1.7 percent for November, over three times the average forecast which predicted a 0.5 percent drop.

(Read More: Weak Japan Data Bolster Abe's Hand on Stimulus)

Consequently, the yen fell to its lowest in more than two years versus the dollar and its lowest in 17 months against the euro.

'Fiscal Cliff': a Storm in a Tea Cup?
Daniel Harden, senior commercial dealer at Global Reach Partners, told CNBC the "fiscal cliff" is a storm in a tea cup, and that he is confident the laws will be changed whether it is before or after the deadline.

"They're very firm on bold monetary easing, and what we're seeing is the market selling the yen as a result. The yen will continue to depreciate. And I'm not the only one that's thinks the yen will continue to struggle moving ahead," Harden said.

(Read More: Japan's Deflation Battle—Why This Time Is Different)

Investors will turn to high-yielding assets as a result of the central banks' willingness to print money, according to Harden, and he says some may even turn to the euro and sterling despite the uncertainty still affecting the continent.

"My trade for 2103 is actually opening up the carry trade," he said, opting for a switch to currencies with a high interest rate from those with a lower interest rate.

"So not only shorting the dollar but also shorting the yen and potentially getting into your high-yield currencies like the aussie and like the kiwi," he said.

By CNBC.com's Matt Clinch

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