Yen now and through the summer

Discussion in 'Forex' started by Chood, Jul 4, 2005.

  1. himself

    himself

    I am long the yen and perhaps that is coloring my thinking but I really do not understand something.

    The press is saying that the upward movement in the dollar in relation to the yen is caused by hedge funds pouring into the "carry trade", being in effect short the yen and investing in the dollar to pick up a 3 1/2 percent per annum difference in interest.

    Is that sane when there is substantial event risk that the yuan will finally be allowed to move up?

    Would not such an event inflict a large ( in relation to 3 1/2 percent per annum) loss especially when so many decided at once to reverse out of the carry trade and run through the same door?
     
    #11     Jul 6, 2005
  2. At least your news sources are not citing nonsense like "yen is falling because of high oil prices" like most do...

    It's true that the only reason why Yen is collapsing is due to the "carry trade".

    But reemember, many hedge funds take bigger risks as the managers need just ONE year to collect millions in incentive fees and be set for life. If Chinese revalue, then probably the market will experience an abrupt unwind, like 1998, where Yen gained +7% in 2 days.

    As long as BOJ is condoning/allowing the Yen carry trade, by refusing to protect the value of the Yen, this game will continue.

    Who said things should make sense? :-(
     
    #12     Jul 6, 2005
  3. Along the same lines, why should yen go higher if yuan is revalued . . .
     
    #13     Jul 6, 2005
  4. Chood

    Chood

    Presumably, pricier yuan would give China's competitors more pricing power and allow them to pull down even greater shares of massive dollar float caused by twin US deficits (spending/saving and gov't). Japan's exporters, who are China's competitors, would benefit directly. Japanese economy and yen (particularly relative to the dollar) rise as a result. That's my understanding of one reason for the higher yuan/higher yen paradigm.
     
    #14     Jul 6, 2005
  5. Chood

    Chood

    Reported today, July 11, by AFX: "This week's focus will move from growth and interest rate differentials towards foreign imbalances," suggesting that the dollar will come under broad selling pressure, said BNP Paribas currency analysts.
     
    #15     Jul 11, 2005
  6. fxknight

    fxknight

    I believe that the Yen will rise because it is a net exporter as well as China and the increaded competitiveness will help appreciate the currency. It could also impact government intervention there.
     
    #16     Jul 11, 2005
  7. Chood

    Chood

    Paradigm panned out (YEN up vs dollar more than 2 pct today on news of YUAN revalution), so where does YEN go from here?
     
    #17     Jul 21, 2005
  8. Chood

    Chood

    Did you exit on Yuan revaluation? Large move that day, then, confounding, almost all of that Yen advance dissipated -- until today, that is.
     
    #18     Aug 3, 2005
  9. Chood

    Chood

    Interesting news today, August 15th, reported by AFX, on "foreign demand for long-term US Treasuries":

    "According to data from the US Treasury Department, foreign capital flows into the US reached 71.2 bln usd from 55.8 bln in May, beating predictions of a more modest rise to 65 bln usd and comfortably spanning the 58.8 bln usd trade gap during the same month. But the news was not all good -- foreign demand for long-term US Treasuries sank to a 21 month low of 7.9 bln usd from 27.6 bln usd in May. The bulk of the increase in June was due to higher foreign demand for US corporate bonds."
     
    #19     Aug 15, 2005
  10. What about treasury coupon repatriations??
     
    #20     Aug 15, 2005