Saturday, 13 December 2008

USD/JPY Update

Could not resist the USD/JPY move under 90.00 yesterday so bought back USD3m at 89.63 closing out the short at 96.97 (see here for details) to re instate my original position of long USD3m at 103.10.... ouch! So banked a gain but still have an overall unrealised loss.

Will update net positions over the weekend.

Still believe the USD/JPY does not make sense under 110 given the state of the Japanese economy. Buying USD/JPY at close to 13 year lows seems sensible, but admit it hasn't worked so far.

As an aside, what really pisses me off are these comments from Reuters:

"Earlier, the dollar plunged to 88.10 yen , its lowest since mid-1995, after the U.S. Senate rejected a $14 billion auto rescue plan. That heightened recession fears, pushing investors to buy the yen to cover trades that were financed by borrowing the currency at low rates."

That is such a ridiculous comment. Who still has a carry trade in place to repay given the huge falls in the NZD/JPY and AUD/JPY and the JPY generally against the world? The corporates are well hedged and the Japanese housewife just acts on maturity and generally rolls over to keep yield. They certainly don't react to auto bail out failure news.

Sure there are new carry's being placed, but those are generally with intentions of adding on lower levels, not getting out, and waiting for the big retracement/new trend back again.

Who writes this crap?


Raf said...

That's about all the media know about when it comes to the yen.

But you're a brave man being long $/yen.

It gets crushed both ways from what I can see. The recent rush to deleverage and buy $ saw then yen rise and now the $ is getting caned then yen rises.

Also the capital flows needed to shore up the domestic economy are playing a part here. The sheer weight of Japan Inc's long $ positions also provide an overhang.

I've never seen the Yen as a straight "economy" play. But I'd be interested to hear your reason for being short yen.

Tim said...

Entertaining. :D

I often see complaints about lack of journalist understanding - the latest scientific 'breakthrough research' being a perennial favorite.

If they really want to find a logical connection, how's this for a better one? USA decides not to bail out US auto companies. Bad for US auto companies, and then unemployment. Less production means a worse balance of trade. Good for Japanese auto companies though, of course, and presumably Japan.

So how's newbie ol' me doing?

Anonymous said...

Journalists are humans too. They got to pay their mortgages, gas bills, food and get the kids through school.

They are just doing what their job spec requires them to do: write something. So the poor chap will have to find some 'reasons' to explain off the USD.JPY movement. Most of these 'market' jouralists have to come up with a write up at least 2-3 times a day - he is not responsible for finding the correct reason why the yen moved but rather he is only writing becuase the job pays him to.

I used to muse at the Houston Chronicle where everyday the paper will have to something to say about the price of oil - regardless whether oil is up 2 dollars, down 5 dollars and unchanged. For years now ... that has not changed and will not change.

With the year end closing in ... i do feel we will get the book dressing effect - low volumes can make it easy to pump or dump things. We will have to see.

Anonymous said...

The key is to "guess" where there book dressings will impact price. I think a lot of people are somehow hoping for an early 09 rally. I wonder what that will do -- probably muddle things even more.

If one is willing to wait (and pay a swap as it turns out), I think a short yen trade might work. And there are ways of managing the loss while the trend unwinds. (I'm short yen myself vs NZD and USD, and will add as yen moves higher. But I'm not a professional anything in this business.)

Since nobody is asking my opinion, I do think we'll see more money moving into US and Chinese stocks in 2009. This won't be a full rotation/rally, but it will have an effect. If the yen uncouples from its dance with equities, then I'll be worried. I'll be watching commodities and credit as indicators for a minor rally.

I'm not "bullish" on equities (or the USD). I just think there is an opportunity to short yen if one can hold one's breath long enough. Someone else reading this might diagnose me with a clinical case of "trader's hope". ;)

Kiwi Trader said...

Sorry for not replying sooner but been a bit pushed this week with client needs.

Will post on USD/JPY trade logic over the weekend.