Posted on 03/16/2011 3:36:04 PM PDT by The Magical Mischief Tour
Yen carry trade = picking up pennies in front of a steamroller.
So did it surge then fall?
Umm, looks like it is the Dollar which fell.
I think the technical term is,,, it went nuts...
You are right, it is the dollar falling, not the yen.
It remains to be see how this will work out.
The yen carry trade has been practiced by the big banks and funds all over the world. Basically, you could borrow the yen for nothing, and then buy whatever you want with it.
If that suddenly breaks down, I should THINK it would affect all sorts of other markets, too.
We’re going to need someone to explain it to us. Or wake up tomorrow and see what happens!
“The U.S. dollar briefly touched a fresh record low of 76.25 yen Thursday in Sydney, easily breaking its previous postwar low of 79.75 yen marked in April 1995, on massive yen buying by risk-averse investors amid speculation that Japanese companies may sell dollar-denominated funds for the yen following the devastating earthquake and worsening nuclear crisis in Japan.”
==Kyodo
That graph shows the yen gaining strength --- it was only taking 79 yen to buy one dollar. For what it's worth, it's currently trading at 77 yen to buy one dollar, down now another 3 yen to purchase one dollar.
He's correct that the BOJ might well intervene, though. It might well wade in and sell yen, trying to weaken the yen back to, say, 80 yen to buy one dollar.
The yen contract is showing the same spike in reverse. The SPX futures aren’t liking it at all, that’s for sure.
Bloomberg: Mar 16, 2011 3:45 PM PT
Nikkei 225 Stock Average futures in Chicago showed the benchmark measure of Japanese shares may drop after a U.S. official said all water has drained from a spent- fuel pool at a nuclear plant, raising the risk of radiation.
Contracts expiring in June changed hands for 8,360 in Chicago as of 7:43 a.m. Tokyo time today. That’s 6.6 percent less than the futures closing level yesterday of 8,950 in Singapore. Standard & Poor’s 500 Index futures fell 0.7 percent to 1,245. The yen reached a post-World War II high against the dollar as the risk of radiation leaks from crippled nuclear plants in Japan stoked speculation insurers and investors will redeem overseas assets to pay for damages.
” insurers and investors will redeem overseas assets to pay for damages. “
Is this pundit-speak for “Dumping US Treasuries”??
Bernanke better warm up the presses....
(Yes, I KNOW that he isn’t physically printing money - that’s a *Metaphor*!!!!!)
(Reuters) - The yen soared to a record high against the dollar on Thursday in chaotic trading as a break of the previous peak triggered a host of stop-loss and option-related selling, which in turn caused a cascade of algorithmic sales.
While the escalating nuclear crisis and subsequent rush for safety was the initial spur for the move, this latest lunge higher in the yen was more about positioning.
All sorts of exotic option and structured products were being stopped-out, while many Japanese margin traders were forced to bail from leveraged trades funded in yen.
Dealers said the market was increasingly disorderly with liquidity evaporating and bids pulled, leaving huge gaps in the charts. Many were actively hoping the Japanese authorities would intervene to provide some liquidity and restore order.
“It’s mayhem out there,” said one trader at a Australian bank in Sydney. “The yen’s been moving a big figure a second on occasions. A lot of people are crying out for the central banks to step in.”
The dollar/Swiss franc lost over 100 points as well and it was already at it’s HISTORIC low.
I know because it hit my stop loss which I thought was a safe one hundred points below the record low.
Would you mind fixing the title? The Yen suddenly rose 5%, not dropped 5%.
Would you mind fixing the title? The Yen suddenly rose 5%, not dropped 5%.
If the Japanese have a lot of debt, denominated in Yen, and hold a lot of other currencies (e.g. the USD) then a suddenly strong currency is not to their advantage.
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