Mike Norman, anchor, HardAssetsInvestor.com (Norman): Hello everybody, and welcome back for the second part of my interview with Marc Chandler, chief currency strategist at Brown Brothers Harriman. So Marc, let’s talk about some other currencies.

What about the yen? Japan’s economy is still very weak. There’s talk from monetary authorities in Japan that they would like to see a further depreciation in the value of the yen, maybe to 95 against the dollar. It looks like it’s kind of slowly going there. But what’s the outlook for Japan?

Marc Chandler, chief currency strategist, Brown Brothers Harriman (Chandler): Yeah, I think the outlook for the Japanese economy looks relatively robust in the first half of this year. But they still have this big problem of deflation. And so, obviously, you're right; the Japanese officials, especially the government, want to see a much weaker yen. And there was some talk that the government put together a panel that was talking about 120 to the dollar. And, like you said, we were trading like in the 93 to 95 kind of range.

I think that, in many ways, the yen doesn’t seem to be motivated so much by what’s happening in Japan. It seems to me, now, if you were to tell me that Greece is having problems, I’d say buy the yen if those problems are flaring up. So, I say, right now, it’s almost like the yen is back to its old role as a carry trade and that is selling the low-yielding Japanese yen to buy a higher-yielding asset or currency.

And as problems arise in the world economy, people want to unwind those carry trades. I don’t personally like the yen. I’d rather be using it as a carry trade myself. I like the Australian dollar against the yen. I like the euro against the yen. But I don’t like to trade against the fundamental views. And I think the Australian dollar can be strong against the yen, but I don’t like the euro, still, because of what we were talking about with price.

So, I want to avoid the euro-yen trade. But in general, I think that the Japanese economic fundamentals are poor and that the economy is getting stronger, mostly because of exports. But the deflation environment makes the yen overvalued, really.

Norman: All right, now we can't have a currency discussion without talking about the big story, which is the Chinese yuan and mounting political pressure from right here in the United States on China to let their currency flow freely. The interesting thing that I’ve seen, just recently, is that China posted its largest trade deficit ever.

Chandler: It’s a trade deficit ...