Will Ford Fall? Toyota Surge? Protect Your Portfolio With This Tool | DailyFX

18 Янв 2015 | Author: | No comments yet »
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Will Ford Fall? Surge? Protect Your With This Tool

Do you own stocks? Protect your


Why is Ford Motor falling, and why is Toyota Motor surging? We take a look at a key that may continue to haunt stock price in 2013.

stock price has fallen by as as 10+ percent from recent peaks, but Toyota’s stock has moved exactly in the opposite and trades over 20 percent through the same stretch.

(F) Stock Has Declined While (TM) has Surged

The key disconnect seem to be mere coincidence: it with a substantial move in the US exchange rate versus the Yen.

The link between the US Dollar/Japanese Yen rate and Ford stock has through several stages in years, and understanding the difference explain why the Yen is now relevant to Ford.

One: The Financial Crisis was the Top for Ford and the Yen

From the beginning of to the end of 2008, Ford stock’s dropped by 64.2 percent and the US depreciated by 19.8 percent its Japanese counterpart. The financial has a particularly negative effect on any linked to the highly-indebted US consumer, and stock fell sharply as a The Japanese Yen similarly benefited the Greenback for comparable reasons.

Stage Two: Ford Tumbles and US Dollar Falls versus Japanese Yen from

We then saw a significant reversal in stock as the SP 500 rebounded and the US economy All the while, controversial Quantitative policies by the Federal Reserve that the US Dollar weakened the highly interest rate-sensitive Yen.

Stage Three: US Strengthens versus Japanese and Ford’s Stock Price

Ford stock moved alongside a resurgent SP 500 as record-low rates fueled investments and consumer spending. All the while, a US currency moved to fresh peaks against the Japanese Both Ford and the USDJPY consistently higher until the Yen the key ¥90 mark against the US

Why was the break above ¥90 in the significant?

Ford competes auto manufacturers across the and impressive US Dollar strength the Japanese Yen makes its cars expensive in Japan. A cheaper Yen that Japanese cars less expensive in the US. The double-whammy is to boost the stock price of the Motor Corporation and simultaneously Ford stock.

According to financial reporting for Q4, 2012, the profit of Ford Motor in the segment fell to a paltry $39 North American profits nearly 50 times that

Toyota FX-1

But recent price action that investors fear further Japanese Yen depreciation gains) could cut into profits as Japanese auto gain traction.

Toyota’s is up over 20 percent year-to-date, Ford is only up 2 percent.

How do we Against the Key Risk to Ford

The way to protect against the exchange risk to Ford stock relatively simple: sell the Yen against the resurgent US Dollar. a currency trading platform, is as simple as going long the currency pair.

Past is not indicative of future results, but stock saw an 11.4 percent in the same time that the strengthened by 4.5 percentimplying that a 1 gain in the USDJPY could Ford by as much as 2.5 percent.

Ford’s stock may not follow the on a tick-for-tick basis, but we do believe the Yen can have a significant impact on and Toyota stock through the future.

— Written by Rodriguez, Quantitative Strategist and Mu, DailyFX Research Team

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