I don't have a stop on this one, because it's a medium term view. I'm not "all in" by any stretch, I can add if I have to, but I think BoJ will defend 80 in any case to the hilt if required. 90% of my trading is short term and I use stops on these, then I hold 10% based around longer term views, and exit these if fundamentals change or if the pain is too great I only entered Friday and I envisage trading around this core position for months on end - but I should add that I've been waiting for a catalyst to short the yen for around two years...
The carry trade via shorting JPY was much greater a few years ago before the US housing and credit crisis...it started to unwind even before other nations joined Japan in cutting rates to near zero levels and pursuing QE Previously the carry trade primarily involved shorting JPY or CHf, now you can take your pick from USD/CAD/CHF/JPY/GBP/EUR, it has much more became a crowded space, which is why I think yen selling pressures dwindled in the past couple of years. Especially with guys like Bernanke at the helm. It was primarily the UNWINDING of the yen carry trade that drove USDJPY from 122 to below 100 I actually think there will be fresh initiation of the carry trade via shorting JPY because uk, eur, swiss and eventually us will raise rates before Japan...given the present situation in Japan this is even more the case JPY once gain becomes THE best short to initiate new carry trades.
Then you're target is bs. If JPY goes to 40 against USD and then later hits your target, are you going to claim your prediction was accurate?
Well if you want a prediction then I'd say I don't expect USDJPY to drop below 75 at any point in 2011. If it drops below 75 at any point I'd say I was wrong with my prediction. But I won't be stopping out there. Hey I'm not giving trading advice here, trade it as you see it, I'm just sharing my thoughts. If you don't like, just dismiss it, no skin off me.
Its highly likely that in the short term the Yen will fall but 6 - 12 months out it will strenghten. Not buying yet. People will require replacement housing and to a lesser extend transport and will need to spend which will invigorate the economy. Due to factories having been shut down there will be a shortage of new merchandise which will drive up the prices of new and used alike. E.g. People will require beds to sleep in and items like washing machines and fridges. Having a shortage at home will drop export numbers of same which in turn will drive up the prices abroad. Then after "everything has stabilised" the bill have to be paid which can only happen through increased exports which in turn will lead to a weaker Yen.
It's just because I think there's an older thread here where I have done just that, Ed... I was too lazy to repeat myself, is all. Certainly didn't mean it to come out all high-falutin' like. BTW, benwm, the other story making the rounds and being blamed for the strength of the yen is the repatriation by casualty insurers. Since they may have to sell foreign assets to pay out in yen. I am not sure if it's real or if it's the mkt getting ahead of itself.
Are you bailing out Roark, or have you already done so? Let me know when you do, I'll take the other side
To elaborate.. Currency values are based on relative levels of purchasing power, where pp is determined by credit cycles in each host country. High credit growth is characteristic of expansionary conditions, which is inflationary and erodes purchasing power, which depreciates a currency relative to a slow(er) growth nation. Conversely, during recessions and depressions, credit destruction takes hold, which leads to price deflation, which is synonymous with increased purchasing power, which appreciates a currency's value. That general relationship was easy to chart and track before the advent of globalization where regional and national economic cycles were largely asynchronous and independent. Globalization synchronized most economies making it difficult to see the relationship since most economies - and therefore, currency values - go up or down together. What happened in Japan is largely what Ed Breen mentioned. Huge swaths of Government, business and consumer assets were wiped out. Assets are the basis for debt, or new loans. And since hundreds of billions in dollars in assets were wiped out, a corresponding downtick in loan creation will result. In other words, a good chunk of the collateral needed to finance the prior level of loan creation no longer exists....! Which fuels net credit destruction (relative to the trend up until last week), which is deflationary, which increases the purchasing power of the Yen, which appreciates it against the USD. Of course, the GOJ and BOJ has intervened and printed to stave off another round of deflation, but that's the general theme and explains why the market reacted the way it did. In a way, the economic impact of the quake is similar to the housing collapse. Over a few months, the balance sheet of middle America took a 30-50% haircut. That 30-50% reduction in fungible assets, reduced their borrowing capacity by a similar amount, fueling credit destruction, and rebounding the US dollar. Of course, the flight to safety trade plays a huge role. But an appreciating greenback would have occurred regardless.