AuthorTopic: Why is the Yen So Hot All of a Sudden?  (Read 845 times)

Online Eddie

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Why is the Yen So Hot All of a Sudden?
« on: February 11, 2016, 08:34:11 AM »
The USD is falling against the Yen this morning. The MSM is all full of "investors running to safe haven assets".

But the USD and Treasuries are generally the safe haven assets that have been showing strength as of late, so why the switch to Yen?

You can read a lot about carry trades unwinding, which strengthens the yen, but that's not what's going on right now. It's actually a little counter intuitive to me, the sudden USD/JPY adjustment. I did some reading and I'm convinced it's all about the derivatives market, which is in turmoil, to say the least.

(from a 2013 IMF working paper.)

The evidence presented in this paper supports the interpretation of the yen as a currency with
safe haven status. But safe haven effects work differently for the yen than for other safe haven
currencies. Surprisingly and in contrast to the experience of the Swiss Franc, yen risk-off
appreciations appears unrelated to capital inflows (cross-border transactions) and do not seem
supported by expectations about the relative stance of monetary policies. Instead, we presented
evidence that portfolio rebalancing through offshore derivative transactions occur
contemporaneously to yen risk-off appreciations. This could reflect either a causal effect of
portfolio rebalancing through derivative transactions or the workings of self-fulfilling
expectations causing both currency appreciation and portfolio rebalancing.


https://www.imf.org/external/pubs/ft/wp/2013/wp13228.pdf

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Offline RE

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Re: Why is the Yen So Hot All of a Sudden?
« Reply #1 on: February 11, 2016, 11:34:24 AM »
The USD is falling against the Yen this morning. The MSM is all full of "investors running to safe haven assets".

But the USD and Treasuries are generally the safe haven assets that have been showing strength as of late, so why the switch to Yen?

It's relative.  If yen is appreciating, somebody is buying it with another currency, but not with dollars.  It's also somebody with a large pocketbook who wants to dump dollars.  Who might that be?  The Chinese of course, selling yuan to buy yen.  The Chinese want to depreciate their currency anyhow.

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Online Eddie

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Re: Why is the Yen So Hot All of a Sudden?
« Reply #2 on: February 11, 2016, 01:29:36 PM »
Maybe the Chinese buying yen with yuan and dollars? Wonder if they'll buy Euros with dollars to buy Iranian oil. Our European allies would love that...the US Deep State, not so much.

There's go to be a good joke here. Something about the Japanese having a yen for the yuan.....but Abe-san is probably shitting his pants on the yen move.


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