Posted on 05/12/2013 5:56:26 AM PDT by SeekAndFind
The yen slid to a 4-1/2-year low against the dollar on Friday, triggering a sell-off in oil and gold as well as safe-haven U.S. and German debt, after recent signs of strength in the U.S. labor market added to bullish sentiment on the dollar.
Wall Street surged at day's end, pushing both the Dow and the S&P 500 to record closing highs.
Data on bond holdings in Japan showed the Japanese were buying more foreign assets, and the yen's collapse reverberated throughout financial markets. Conflicting signals about how investors view the economic outlook added to the yen's wide impact.
The greenback rallied broadly as recent data indicating an improving U.S. jobs market sparked speculation the Federal Reserve may scale back monetary easing. The policy was designed to bolster the economy, and it also has lifted the stock market.
The firmer dollar pressured oil, as the strength of the dollar makes commodities more expensive for holders of other currencies. The fall in oil was intensified by rising supplies and doubts over the strength of China's economy.
"There are two fundamental themes. The first is that despite signs of slower U.S. growth here in the second quarter, the U.S. labor market continues to improve," said Marc Chandler, head of global currency strategy and Brown Brothers Harriman in New York.
"The second is the news reported in Tokyo ... that Japanese investors turned buyers of foreign bonds," he said, calling it an important signal for the "yen bears."
The bearish investors were already selling the yen on expectations that Japanese investors would sell as the Bank of Japan's stimulus measures displaced them from the local bond market, Chandler said.
(Excerpt) Read more at reuters.com ...
OK, “stupid question” time.
What does “Yen hits low vs. dollar” mean?
That it takes more yen to buy one dollar than it has at any time in the last 4 1/2 years?
Oil at $96.04 is not a “tumble”.
Yeah, but that doesn’t sound as good in a headline.
Yes, exactly that, and of course by definition that a dollar buys more yen as well. This means that if a product is made in Japan, and therefore priced in Yen, that a person with dollars can now obtain that product more cheaply.
The weak yen is good for Japanese exporters, whose goods are now priced relatively more attractively to US consumers and that’s why the Japanese stock market is lifting off.
If the yen is 100 to the dollar, it means that you “spend” 100 yen to “buy” one dollar. If the yen rate goes to 125 to the dollar, you then have to “spend” 125 yen to “buy” one dollar. Thus the yen has dropped in value to the dollar. If the yen goes the other way and is 90 to the dollar, you have to “spend” 90 yen to “buy” one dollar. Thus the yen gains in value to the dollar. Bottom line, the more yen it takes to buy a dollar, the “weaker” the yen becomes.
They are talking about North Sea Brent which was $115 early this year. Dropped to $101 but settled at $105. The price difference between Brent an WTI has been closing lately.
I've been sort of piddling around with foreign currency denominated CD programs, for one because traditional accounts aren't returning squat and a judicious foreign “buy” when the dollar has spiked as it has done several times since 2008 serves as another source of return.
This has paid out fairly well over the three years I've been doing it, particularly Swiss Franc to Euro when the Euro bottomed below $1.21. That may have been dumb luck but paying attention does tend to highlight obvious opportunities for cautious risk-taking.
I got out of Euros at $1.34, these CD programs can be as short as three months and the return is still negligible in any major currency. It's the exchange rate float that makes them attractive.
That money has been sitting in dollars for months making nothing, waiting for another “distortion,” with the dollar at a high and a major foreign currency at a low. This might be the next opportunity.
I've stuck with Europe and Canada thus far, I understand them better. That Japan as a major manufacturer and exporter needs a “cheap” Yen gives me a little pause so I'm going to have to do some looking around to make sure I'm not making a bad assumption.
The other reason for doing this is to educate myself. There may be a time coming when such knowledge is very useful for capital preservation, maybe even key to avoiding suffering, if our own currency gets into major trouble. There are certainly enough indications of this being a possibility.
You seem to know what you’re about in terms of currency exchange and playing the field - a lot more than I do anyway.
I’ve been thinking about investing in some foreign currency and probably would if I had a clue. Particularly in the Israeli Shekel. How’s that for crazy? I’m already invested in an Israeli Oil company... the only one that hasn’t found more than a half pint of oil yet.
Last I knew my $1K worth of stock was good for about $300.
Now anyone with nugget of financial sense would consider that a “loss”; I look at it as a sacrificial offering... but it’s about on par for whatever I do in terms of “investment”.
Any advice for how a “little guy” might go about dabbling in currency exchanges? It worked so well for Soros....
I don’t do gold; back when it was about $367 an oz. our financial advisor told us, when I suggested laying some in; “NAAAH!; You don’t want GOOOLD!”
My Wife glared at me for even suggesting such a stupid idea and confirmed his advice. We got a nice mutual fund in stead.
A couple of years ago I bought a little silver just so I could say I did... recently silver sank back to about where it was then, and I’m tempted to invest in some more. It can’t hardly become worthless, can it?
Tried to order some on line but it won’t take; will try calling their land line tomorrow. With my luck, by then it will be back up around $67.
Were I contemplating escaping to another country when (or better yet before; “when” will probably be too late) the regime comes after the Christians, TEApers and Jews, I might lay up as much of the intended haven’s currency as I could smuggle out (by then the borders WILL be sealed, with the barbed wire pointing IN) and would have stashed some with a trusted colleague over there. Then when I arrived I’d find out if he was really trustworthy!
Would you open an account in a country of potential refuge to hold an escape stash in the local currency for you?
Is there any place where funds can be stowed where the regime can’t seize them without overthrowing that country?
Will I get arrested, looted and tortured just for asking?
That’s why I’m thinking Israel; if Israel goes down, Human civilization goes down with it, and money will probably do us little good at that point.
Google dow x yen and up pops the answer.
Oil fell, and gas went up as much as 20 cents a gallon last week. Go figure.
It means you will spend fewer dollars to buy stuff from Japan. Japan depends of exports to keep it’s economy going so they are devaluing their currency in the hope that exports will pick up.
Regarding Israel, I'm somewhat surprised that there has been no further effort that I'm aware, to further capitalize upon evangelical sentiment to enhance capital inflows. I'll leave it at that. I'm pro-Israel myself but would worry about falling in love with such an investment. That is not a wise thing to do in terms of purely financial thinking.
If you want to look at a very simple way of following currencies and then getting into it with low cost of entry, flexibility and minimal risk, I'll mention the name of the institution with which I've done this. Everbank. I am not affiliated in any way other than having a CD or two there.
My rule of thumb has been not to “buy” unless the dollar is strong, and not to “sell” until the foreign currency I've gone into appears to be reaching a 52 week high versus the dollar, always “repatriating” to dollars in between.
I made one exception and went from Swiss Franc which had skyrocketed, into Euros which the Swiss had more or less agreed to backstop. It looked as close to a sure thing as you'd likely ever encounter, and as it turned out it was. Could’ve been dumb luck too, lol.
With that one exception, this was all done via opening and closing short-term CD accounts, moving out of a strong dollar into a major currency at a low, then back again when rates “normalized.” FDIC backing for those CD programs, too.
Judge wrongly and you'll lose principal, though. It hasn't happened to me yet but I'm very aware that it can and probably will at some point.
It means that our military in Japan get more ¥ for their $. This is good.
I agree-considering the headline, that info should have been in the first paragraph. Instead it was about halfway into the article, 101.98 yen to the dollar.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.