The case of currency uncertainty

http://www.economist.com/daily/news/displaystory.cfm?story_id=11392398&fsrc=nwl

"Will the Japanese yen continue to strengthen? It’s difficult to predict, given uncertainties over how much more carry trade unwinding will be seen but also because of the less-than-blooming state of the Japanese economy and the difficulties in predicting whether the central bank will tighten monetary policy later this year. The future direction of the US dollar is similarly uncertain. For the moment the Fed is in watch-and-wait mode, but if the outlook for 2009 darkens over the course of this year another round of monetary loosening will be on cards. If that happens, the current rash of predictions that the dollar has now bottomed out could prove unfounded."

"A number of countries with high levels of inflation have this year suffered alarming slides in the value of their currencies against the dollar or euro. Romania’s currency softened by nearly 10% against the euro in the first three months of this year. Over the same period the South African rand lost nearly 20% of its value against the dollar and the Turkish lira lost 14%, while Iceland’s krona suffered a spectacular 30% drop in value versus the euro between January and May. Inflation and large external financing needs were the common factors behind these declines."