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Pioneer Funds Annual Report 2012
Annual Commentary on the Financial Markets (continued)
Currencies: The search for competitive currencies becomes broad-based (continued)
Until August, a climate of global risk aversion prompted many investors to seek safety in the Japanese yen, for being the currency of a country
at risk of recession, but with full monetary sovereignty and plenty of domestic savings. The yen’s 10% depreciation in 2012 against the US
dollar largely originated from speculators exiting “risk-off” strategies.
Although most Western analysts paid a lot of attention to the yen/dollar rate, other Far Eastern countries such as South Korea, Taiwan and
China account for more than a quarter of overall trade, so they are as important as the US or the eurozone. In this respect, the yen’s effective
(trade-weighted) rate was down even more. A further 10% decline would get it back to pre-US banking crisis levels of that year, shedding what
is left of the yen’s safe-haven allure.
Looking ahead, global economic conditions may improve as some risk factors recede. To start with, a compromise agreement over tax policies
should be found in the US (averting the “fiscal cliff”); moreover, there is the growing perception of a soft-landing scenario for the Chinese
economy. Last but not least, with regard to the EU’s sovereign-debt crisis, key steps such as the creation of a single supervisory mechanism are
being envisaged and will be gradually implemented.
Pioneer Funds - Annual Report 9