USD/JPY best short ever

[money tree]

Japan today announced that its 7 year run of deflation has ended. rates are expected to rise as early as June 06.

With USDJPY around 119, this represents the short of the decade in my book.

Im looking to short 100k @ 119.25....and add as it falls toward 100.

 

[money tree]

filled

 

[wayneL]

Agreed,

In fact I'm ready to back anything against the dollar. But I'm also particularly interested in the yen

Been trying to long the yen (futures are JPY/USD the chart is the inverse) for a week. Keep getting shaken out with small profits.

But ain't missing the liftoff thats for sure.

 

[money tree]

15 min trendline support 119.07

daily trendline support 112

USD traders on thanksgiving holiday. Thats why yen is weaker vs GBP CHF EUR....but not USD. Come monday it will be tank time.

 

[wayneL]

15 min trendline support 119.07

daily trendline support 112

USD traders on thanksgiving holiday. Thats why yen is weaker vs GBP CHF EUR....but not USD. Come monday it will be tank time.

Yes the chart is quite compelling.

Nice support at 83.95 on the daily (whatever resistance that means in fx land) It has just put in a spring bar (or pin bar or hammer, whatever) on the 15m...

I might be joining you...lomng though of course

I've gone long euro as well on whats likely to be a quiet day hmmmmmm

 

[wayneL]

It broke support... resistance ...whatever/

 

[Kauri]

USDJPY... Took a short position in the wee hours, looking to see 1.14's again..

 

[drillinto]

Buy The Yen Now

James Grant | 03.26.07 |

The yen is a piece of paper of no intrinsic value. Then again, so is every other currency under the sun. Each derives its value from the stamp of a government. What sets the yen apart is its tiny yield, five percentage points less than the money rates available in the U.S. and U.K., never mind the customarily higher-yielding currencies of Brazil, Turkey, Indonesia and other such subprime nations.

That is not the worst of it. The worst of it, for a yen bull, of which I am one, is the perceived certainty of things. At 121 to the dollar, the yen on Feb. 26 stood at a 15-year low against the euro and its predecessor currencies, and a 21-year low in real trade-weighted terms. Before the worldwide selloff that began on Feb. 27, there was supposedly nothing on the horizon to change things.

A little inflation would give the Bank of Japan the latitude to put up its call rate. To the accompaniment of millions of wringing hands, the central bank did double that rate, all the way to half a point, on Feb. 21. But, because the so-called core CPI continues to sag, another doubling seems unlikely. So sell the yen or avoid it, the consensus of expert opinion held. Just don't buy it.

As an investor in Japanese equities, I'll now talk my book. I believe that the yen is a worthwhile investment. It's a bargain in fundamental, purchasing-power terms, for one thing. And it provides low-cost disaster insurance, for another.

The yen is cheap for the merchandise it can buy today. It is also cheap for the corporate assets it could buy tomorrow, if only Japan's famously shareholder-unfriendly corporate managements would wake up to the best practices of the 20th century, never mind those of the 21st.

But more and more, they are. Late in February, for example, a Japanese fund manager did the heretofore impossible. Ichigo Asset Management, with all of $25 million under management, solicited more than 42% "no" votes to oppose the proposed acquisition of Tokyo Kohtetsu Co. by Osaka Steel, a union blessed by the two corporate managements and therefore, under the old rules, a done deal. But the rules have changed, and the merger is off .

Ichigo's success in blocking this transaction represents a bell-ringing first. Scores of Japanese companies are commandingly cheap on an asset basis, but the assets are under lock and key. Pry the keys from management's hands, and investors would beat a new path to Tokyo. Tradable merchandise is already cheap in yen terms. Japanese stocks will themselves appear cheaper as the reform in corporate governance continues to make quiet but substantive progress.

I mentioned disaster insurance. The yen, because it costs next to nothing to borrow and because it so reliably loses value against the dollar and euro, is the world's favorite funding currency. People use it to finance investments in a host of higher-yielding assets. Japanese individuals sell the yen to buy Australian or New Zealand bonds. The sharpshooting residents of Greenwich, Conn. use the yen to finance their leveraged adventures in commodities, stocks, bonds and derivatives.

The size of these borrowings--the "yen carry trade," they're called--is nowhere computed but must be immense. Yen short sales stand at a record high, according to the Commodity Futures Trading Commission. And massive offshore purchases of kiwi-denominated bonds have led the New Zealand central bank to serve public notice on the risks of speculating in foreign-exchange rates.

Because nothing is so unstable as a widespread belief in the certainty of peace and quiet, the buildup of yen short sales presents a risk to every investor, Japanese or otherwise. Without exactly knowing, one can be mortally sure that the world is more highly leveraged than even the fretful central bankers suspect. If so, a bear market in any of the popular classes of investment assets would likely turn today's rush to borrow yen into an even faster race to repay it. Maybe it's already started.

If so, the yen-dollar exchange rate could soar. You may recall that in only three days during the crisis surrounding the 1998 crackup of Long-Term Capital Management, the yen rallied by 18%. One way to buy the yen is through a brand-new exchange-traded fund, CurrencyShares Japanese Yen Trust (83, FXY), traded on the Big Board.

As the yen-dollar moves, so does the fund's share price. The prospectus mentions some of the very good reasons not to speculate in foreign exchange. But there's no better time to take out flood insurance than when the sun's shining. The glare--until the last Tuesday in February--was almost blinding.

James Grant is the editor of Grant's Interest Rate Observer | USA |