If I took a punt on every strong view I had, my friend, I would be broke by now. It's not just a function of my conviction, but a few other things. As to armchair trading, I do all right for myself, so mustn't grumble.
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Why the strength in the Yen
- Thread starter bond_trad3r
- Start date
Of course it is Martinghoul, but I didn't sign up to write a book here. If you think more complexity should be drawn out of the simple relationships I scetched, why don't you have at it? Just shooting off that it is more complicated pretends to add comment but it really adds nothing. The fact that you say it implies you know something but you don't share it. Why don't you actually add comment?
The disaster has created an insurance liability which is driving the demand for yen. Insurers collect insurance premiums in yen and reinvest this float in foreign currencies. The creation of a huge liability means they have to reconvert their float into yen.
Maybe this is going to finally create a blow off top in the yen..
I hear the insurance / Mrs Watanabe repatriation story, but that's just one component of the USDJPY mix. IMHO it's dwarfed by the bigger picture implications, flows in the other direction.
Japan is going to be producing and exporting less in the forseeable future and will be more and more reliant on imported energy and foodstuffs. That will create greater demand for foreign currency.
This is where I disagree with Martinghoul - in the medium term I see a much weaker yen, even if in the shorter term it is more up in the air, open for debate.
It's going to be interesting to see how it pans out, but I would think MoF/BoJ is quite happy to just keep accumulating USDs in return for freshly minted JPY. A broadly stable, but gradually weakening JPY is really the ideal policy mix for Japan. A collapsing currency might pose dangers. If MoF/BoJ load up on the yen short now that will give policy makers plenty of reserves to defend the yen at a later stage, if they need to. In any case they will need those USDs to buy imported Oil, Nat Gas, Steel from China,...
In terms of putting on a carry trade via borrowing yen...well, this is also the ideal scenario with yen upside capped...BoJ is going to be holding rates at zero forever now (!) and I can see hedge funds really shorting the yen in mass over the coming months.
Once things stabilize, I think the JPY short will be one of the easier trades of 2011/2012.
Japan is going to be producing and exporting less in the forseeable future and will be more and more reliant on imported energy and foodstuffs. That will create greater demand for foreign currency.
This is where I disagree with Martinghoul - in the medium term I see a much weaker yen, even if in the shorter term it is more up in the air, open for debate.
It's going to be interesting to see how it pans out, but I would think MoF/BoJ is quite happy to just keep accumulating USDs in return for freshly minted JPY. A broadly stable, but gradually weakening JPY is really the ideal policy mix for Japan. A collapsing currency might pose dangers. If MoF/BoJ load up on the yen short now that will give policy makers plenty of reserves to defend the yen at a later stage, if they need to. In any case they will need those USDs to buy imported Oil, Nat Gas, Steel from China,...
In terms of putting on a carry trade via borrowing yen...well, this is also the ideal scenario with yen upside capped...BoJ is going to be holding rates at zero forever now (!) and I can see hedge funds really shorting the yen in mass over the coming months.
Once things stabilize, I think the JPY short will be one of the easier trades of 2011/2012.
Quote from benwm:
Once things stabilize, I think the JPY short will be one of the easier trades of 2011/2012.
So far, it's been pure pain. Look at it now. With a massive quake, thousands dead from a tsunami, and rumors of a literal nuclear meltdown, JPY is still holding strong at 82 and change against USD.
it's always the most painful at the end of a sustained trend
i have been trading japan since 1997 so I've got some experience here
trust me, it can turn around fast if BoJ wants it to
before they intervened now they will do it with a real political will, an emotional commitment that nothing will get in the way of
you just watch when 1000s of hedge funds get behind a move- ultimately it will be the JPY carry trade that will drive it, further down the line
usdjpy 120 by the end of 2011
i have been trading japan since 1997 so I've got some experience here
trust me, it can turn around fast if BoJ wants it to
before they intervened now they will do it with a real political will, an emotional commitment that nothing will get in the way of
you just watch when 1000s of hedge funds get behind a move- ultimately it will be the JPY carry trade that will drive it, further down the line
usdjpy 120 by the end of 2011
I know people haven't got many reference points here, but there are so many reasons why this situation is so different from Kobe, and the yen strength that followed in 1995 in the following three months
Take away the tsunami and the possibility of the worst nuclear fallout since Chernobyl, and the death toll which will be 10s or 100s of thousands (hopefully no more), compared to around 5000 deaths in Kobe
Aside from this, Japan government in 1995 was so less indebted than it is today, that time you also had a big trade dispute between the US and Japan, it was before QE, completely different times, IMO. Japan in those days was still pretty much of an economic beast.
The potential for not just a 10-20% drop in yen, but a complete currency collapse exists...the best reference point to Japan now is what happens to a currency in a wartime situation - the ramifications of food shortages, lack of water, radiation getting into the fish and rice supplies, and then the responses from policy makers that have to throw money at the situation with reckless abandon.
I could be wrong of course, but that's the way I see it, FWIW
Take away the tsunami and the possibility of the worst nuclear fallout since Chernobyl, and the death toll which will be 10s or 100s of thousands (hopefully no more), compared to around 5000 deaths in Kobe
Aside from this, Japan government in 1995 was so less indebted than it is today, that time you also had a big trade dispute between the US and Japan, it was before QE, completely different times, IMO. Japan in those days was still pretty much of an economic beast.
The potential for not just a 10-20% drop in yen, but a complete currency collapse exists...the best reference point to Japan now is what happens to a currency in a wartime situation - the ramifications of food shortages, lack of water, radiation getting into the fish and rice supplies, and then the responses from policy makers that have to throw money at the situation with reckless abandon.
I could be wrong of course, but that's the way I see it, FWIW