Market Turning Point Years

As periods, the official United States 1982 Gold Report documents approximately 50 year intervals between Gold and free float currency durations and dates to the 1500’s. If the December 1971 Smithsonian Agreement measured as the free float commencement date, the current term enters not only year 45 but possibly market shifts and currency pair realignments may conceivably be viewed as 12.5 years when separated in four quadrants.
As such, possible turning points since 1971 would occur in 1983, 1995, 2007, 2019 and 2021 as the 50 year end point. From January 1972, possible turning points would transpire in 1984, 1996, 2008, 2020 and 2022 as the 50 year end point.

Predominant market arrangements endured from the 1971 Smithsonian Agreement to the 1985 Plaza Accords then from the 1987 Louvre Accords to the December 1994 Mexican Peso crisis. Market crashes since 1971 materialized in 1987, 1994, 1997 Thai Baht, 2001 and 2008. Year 2008 qualified as a turning point and its possible the crash was the catalyst to switch EUR/JPY from EUR/USD to USD/JPY.

The core of carry trades is found in Uncovered Interest Parity and interest differentials. The UIP condition states high interest rate cuirrencies tend to appreciate relative to low interest rate currencies and violates previous UIP findings. Dated since Fama ( 1984 ) in 100’s of studies, the interest differential between two nations should equal the expected exchange rate. Exchange rate regression on interest differentials should offer intercept 0 and coefficient 1. Instead, the coefficient is negative to inform higher interest rate currencies tends to appreciate. The counter argument to UIP is Fama’s Forward Premium Puzzle. Currencies traded at forward premiums tend to depreciate.

Brian Twomey Inside the Currency Market,


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