Why is the Yen so different?
- Thread starter SomeYoungGuy
- Start date
Yep, I also have found that Yen is a bit different from other majors. S/R levels need to be adjusted only for Yen if you want to trade Yen. On the top of that, its volatility is so bad...so I don't even bother trading Yen.
As the japanese economy is internally very strong due to their service sector so the central bank does not thinks much for the world economy before making any valuation.
Japan is commodity reactive and very strong from IT support.
The economy can be judged from the index as their main Index moves exactly opposite to the currency always.
Japan is commodity reactive and very strong from IT support.
The economy can be judged from the index as their main Index moves exactly opposite to the currency always.
disagree with that as reason because when you look at most of the inter-bank flows in yen (and all others) the money originates mostly with CBs, real money, and hedgers, rather than speculative retail money. While it is true that there was a time when a lot of housewives in Japan punted fx that trend may have been temporary, at least I have not heard nor read of such since after the financial crisis. Looks like a lot of the carry trade mommies got flushed out badly.
What I discovered re yen was that except the times when risk was taken onto/off the books, which is when there is a lot of one-way flow in/out of the yen, the yen as basket contributes actually very little to all yen crosses. You can see that when you run a PCA on the pairs by perusing the contributing baskets (eg., USDJPY, the dollar and yen baskets). The same can be found when you correlate the yen basket with USDJPY, for example, and also correlate the dollar basket with USDJPY. You see that except during strong risk on/off time spans, the dollar flow dominates the yen in driving USDJPY. That's just a quantitative reason.
Obviously a lot of currencies, but particularly the yen are skewed for years now due to the unprecedented central bank involvement. That is definitely messing with the market but I find it harder to quantify.
What I discovered re yen was that except the times when risk was taken onto/off the books, which is when there is a lot of one-way flow in/out of the yen, the yen as basket contributes actually very little to all yen crosses. You can see that when you run a PCA on the pairs by perusing the contributing baskets (eg., USDJPY, the dollar and yen baskets). The same can be found when you correlate the yen basket with USDJPY, for example, and also correlate the dollar basket with USDJPY. You see that except during strong risk on/off time spans, the dollar flow dominates the yen in driving USDJPY. That's just a quantitative reason.
Obviously a lot of currencies, but particularly the yen are skewed for years now due to the unprecedented central bank involvement. That is definitely messing with the market but I find it harder to quantify.
I can't disagree with much of what you state above...
However, IMHO, the underlying core phenomenon remains simply that Japan is a society with a lot of savings (corporate and consumer) and not a lot of places to invest.
but those savings are all parked/locked up in pension accounts. Nobody trades those, most of those savings are even never currency converted as they are invested in JGBs, local agency bonds, and domestic equities. What makes you believe those savings impact the yen? Thanks
This is one of the reasons (I think I have posted a link to this chart before):
Obviously, much depends on whether these purchases/sales are hedged, but I would argue that these flows are very meaningful for the ccy either way.