Telur17
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I think yen is going to rise further...
Problem of captive yen looming large
13 July 2009
Business Times Singapore
Sharp swings in the currency's value has, increasingly, little to do with Japan
CONCERNS on the part of China and other emerging economies about the future role of the US dollar as a global reserve currency reappeared at last week's G-8 summit in Italy.
But while market attention was focused on this, another less noticed yet major anomaly - the 'captivity' of the yen - was being highlighted in currency markets.
The situation came to a head when the yen hit a five-month high on the day that Tokyo stocks sank to a five-month low. This reversal of the normal order - the yen should weaken when Japanese stocks are sold - highlights the extent to which the yen has become a hostage to international speculation.
'The yen is now the funding currency of choice for global speculators,' Jesper Koll, president and CEO of the Japanese research arm of hedge fund Tantallon told BT.
'It has also become one of the best indicators of global risk appetite,' the former chief Japan analyst of Merrill Lynch said.
The yen has taken over from the Swiss franc as the world's leading currency for 'carry trade' financing - meaning that its increasingly sharp and rapid swings in value are no longer dictated by Japan's trade or current account balance or by international appetite for Japanese assets but by factors that have little to do with Japan.
Japan has kept interest rates so low and for so long that the yen has come to be seen as a 'cheap' currency to borrow, and then sell, in order to finance myriad financial transactions around the world. Even the global financial crisis appears to have not curbed this role, judging from recent market movements, analysts say.
All this is bad news for Japan's economy. A strong yen is the exact opposite of what Japan needs now at a time when its exports have already taken a severe beating from the global recession and when deflation appears to have re-emerged in the world's second largest economy.
Worried monetary officials hinted last week as the yen approached 90 to the dollar (and also surged against the euro and the pound) that they might consider renewed intervention in foreign exchange markets to curb the yen's ascent.
But currency specialists say that Japan is impotent in the face of market forces.
'When global 'animal spirits' are rising, the yen weakens, because the world borrows in yen to invest in commodities, currencies and global stocks,' explained Mr Koll. 'When these trades are unwound - profit is taken or losses cut - yen-loans are paid back, and the yen strengthens.
'Ironically, the yen strengthens not because global investors are eager to buy Japanese assets; it strengthens because global investors are selling down global risk assets.'
This is what happened last week when global investors took fright at fresh bad news coming out of the US and decided that global economic recovery might still be some way off.
This 'correction of recovery trade' in stock markets 'is likely to continue for a while', Tohru Sasaki, chief foreign exchange strategist at JPMorgan Chase Bank, told BT.
This means that the yen is likely to remain strong for the time being and some analysts even expect it to breach 90 to the dollar. This would almost certainly result in a further narrowing of Japan's already sharply contracted current account balance and exacerbate looming deflation, economists say. But hard-pressed exporters cannot look to official intervention for help, they add.
'I do not expect any official intervention even if the dollar/yen rate breaks 80,' said Mr Sasaki.
Problem of captive yen looming large
13 July 2009
Business Times Singapore
Sharp swings in the currency's value has, increasingly, little to do with Japan
CONCERNS on the part of China and other emerging economies about the future role of the US dollar as a global reserve currency reappeared at last week's G-8 summit in Italy.
But while market attention was focused on this, another less noticed yet major anomaly - the 'captivity' of the yen - was being highlighted in currency markets.
The situation came to a head when the yen hit a five-month high on the day that Tokyo stocks sank to a five-month low. This reversal of the normal order - the yen should weaken when Japanese stocks are sold - highlights the extent to which the yen has become a hostage to international speculation.
'The yen is now the funding currency of choice for global speculators,' Jesper Koll, president and CEO of the Japanese research arm of hedge fund Tantallon told BT.
'It has also become one of the best indicators of global risk appetite,' the former chief Japan analyst of Merrill Lynch said.
The yen has taken over from the Swiss franc as the world's leading currency for 'carry trade' financing - meaning that its increasingly sharp and rapid swings in value are no longer dictated by Japan's trade or current account balance or by international appetite for Japanese assets but by factors that have little to do with Japan.
Japan has kept interest rates so low and for so long that the yen has come to be seen as a 'cheap' currency to borrow, and then sell, in order to finance myriad financial transactions around the world. Even the global financial crisis appears to have not curbed this role, judging from recent market movements, analysts say.
All this is bad news for Japan's economy. A strong yen is the exact opposite of what Japan needs now at a time when its exports have already taken a severe beating from the global recession and when deflation appears to have re-emerged in the world's second largest economy.
Worried monetary officials hinted last week as the yen approached 90 to the dollar (and also surged against the euro and the pound) that they might consider renewed intervention in foreign exchange markets to curb the yen's ascent.
But currency specialists say that Japan is impotent in the face of market forces.
'When global 'animal spirits' are rising, the yen weakens, because the world borrows in yen to invest in commodities, currencies and global stocks,' explained Mr Koll. 'When these trades are unwound - profit is taken or losses cut - yen-loans are paid back, and the yen strengthens.
'Ironically, the yen strengthens not because global investors are eager to buy Japanese assets; it strengthens because global investors are selling down global risk assets.'
This is what happened last week when global investors took fright at fresh bad news coming out of the US and decided that global economic recovery might still be some way off.
This 'correction of recovery trade' in stock markets 'is likely to continue for a while', Tohru Sasaki, chief foreign exchange strategist at JPMorgan Chase Bank, told BT.
This means that the yen is likely to remain strong for the time being and some analysts even expect it to breach 90 to the dollar. This would almost certainly result in a further narrowing of Japan's already sharply contracted current account balance and exacerbate looming deflation, economists say. But hard-pressed exporters cannot look to official intervention for help, they add.
'I do not expect any official intervention even if the dollar/yen rate breaks 80,' said Mr Sasaki.
dunno if my mum help me change back the yen aleady ornot 
