Disappointment in G7 May Be Built In

This column was originally published on RealMoney on Feb. 9 at 12 p.m. EST. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please click here.

Over the last couple of weeks I have consistently argued (in columns and the Columnist Conversation) that the European finance ministers were setting up the market for disappointment if the G7 statement does not single out Japan or express concern over the weakness of the yen. I had thought such disappointment would hit the yen hard. However, the price action now has me suspecting that the market has sold yen on speculation about disappointment and is vulnerable to a buy on the fact.

Although this may strike some as counterintuitive, there's a market logic to the argument. Of course, with the Japanese markets on holiday Monday, there might be an initial spike down in the yen in early, thin trading. This might be better seen as an opportunity to book profits than the start of a new leg down for the yen. ...