7 replies to this topic

[jjc]

My Fearful Forecast: We will see a large move upward from the Yen as a sign of the carry trade being Removed before an IT top; too much non-directional money in the system for any great move down. More whipping action, slowly crawling up, as we pay the price for the weekly creeper trend of last fall. IMHO the best strategy is to play the ST to VST swings, and be quick to take profits, until we see the whites of the markets eyes. The only really strong advice I can give is to take any and all posts labeled Fearful Forecast with a grain of salt.

[arbman]

I was thinking about the same? What's the extent of the gigantic JPY carry trade currently bet on the USD and USD dominated assets that will need to be unwound in the months ahead?!? Anyone who would like to comment on this?

Stephen Coach commented on this recently... link

http://ichart.finance.yahoo.com/z?s=USDEUR=X&t=6m&q=&l=off&z=l&c=USDCHF=X,USDGBP=X,USDAUD=X,USDCAD=,USDJPY=X&.png

http://ichart.finance.yahoo.com/z?s=USDEUR=X&t=5d&q=&l=off&z=l&c=USDCHF=X,USDGBP=X,USDAUD=X,USDCAD=,USDJPY=X&.png

So far it looks like the BoJ's interest rates policy is kind of behind the inflation curve since Dec. It is one of the few major currencies that lost some significant value against the USD!

Edited by kisacik, 22 February 2007 - 06:32 PM.

[jawndissedi]

A comment from CR's blog:

"The yen carry trade has been added to with a vengeance for the past couple of days; it will probably continue to grow for a while yet. However, before you assume cheap funding is here forever, have a look at a Usd/Jpy chart for 1998, and note the 3 day 135 to 110 "correction". That's called unwinding the carry trade. Strangely, George Soros gave up active hedge fund management and started writing books shortly thereafter..."

[arbman]

[skyymaster]

I don't think this is going to be as big of issue as most make out to be. Major Market Corrections come from the "unknown" because if it is known it is already factored into the Market.

[arbman]

Exactly, jawn. The currency corrections usually happen overnight, I have so many examples of this, if you are not properly protected, it is usually too late once it begins...

[jawndissedi]

I don't think this is going to be as big of issue as most make out to be. Major Market Corrections come from the "unknown" because if it is known it is already factored into the Market.

I used to believe this too. My favorite example was real estate. Prior to the middle of last year, I was an ardent proponent of the view that, because the collapse of "housing bubble" had been forecast so frequently in so many places, it simply couldn't happen. Boy, was I wrong -- and boy, am I gonna pay for it. In all likelihood, my loss on paper will eventually run to seven figures before the cycle is complete. But hey, it's not as though I really earned the gain -- so: easy come, easy go. No whining.

[donmat]

We may still have an IT top in the Yen. The bottom crossovers aren't perfect, but have had a sell since the beginning of the week.