Wednesday, 16 January 2008

NZD/JPY update

Average in NZD/JPY position: 83.75

And that's before the interest in the carry is added in.

But review levels were 84.00, and the NZD/JPY, at 81.20, is well below 84:00 review level.

This cross can only move dramatically lower if the USD/JPY falls or the NZD/USD falls. There was always a chance that the USD/JPY would move lower on a weaker USD. But to have the NZD/USD move down at the same time makes this cross drop real fast. Once again "carry trade unwinding" is blamed. My experience of most carry trades is that weakness is used to do more, and in a few weeks, the yield has pushed it back up again.

I do not see weakness in the NZD/USD as sustainable.

Therefore, have further added to the position at 81.20, pulling the average down to 82.90.

Fortune favours the brave!!


Anonymous said...

Is this more a case of you expecting the NZD to rise, rather than the USD falling?

Kiwi Trader said...

Well, I expect the NZD to rise against the USD. But equally would not be surprised to see the USD strengthen against the JPY, mainly because a lot of bad news is priced into the USD but not yet into the JPY. Either way, I expect the NZD to do well against both the USD and the JPY in the weeks ahead, and have extended long positions in the NZD as a result.

We will see!!