📉 The Nikkei225 index is down 4.2% this morning to 38.181 as of 910AM, while the Japanese yen surged after the ruling Liberal Democratic Party picked Shigeru Ishiba as their next leader over Sanae Takaichi who was favoured to win ⚡ The yen strengthened more than 1% to as much as 142.8 against the dollar, unwinding several days of declines on speculation over a Takaichi victory Ishiba, who has served in several senior roles including defense...
As the inverted yield curve resolves, the unwinding of yen carry trades will accelerate. I always say that when the yield gap between U.S. and Japanese 2-year bonds narrows, the yen strengthens. If this yen appreciation turns into a trend, the carry traders will face increasing foreign exchange losses. This, in turn, lowers their risk appetite for carry trades. By the way, the resolution of the 10Y-2Y inverted yield curve is driven by a bul...
Cantom
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Boris Johnson
:
Hey, thanks for the comment Yes, I see a resistance around 140 as well based on my technical analysis. By the way, looking at much longer term, I expect USD/JPY hitting below 100 with US02Y 1.00% and the yield gap between 10y & 2y being 2.50%, unless long term yields gaining momentum upwards, which I don’t think very likely with the current CDS level. We are still at the very beginning of the rate cuts. Let’s see how it plays out
Cantom
OP
Ghost2737
:
Hi! Telling when is the last thing I want to do, but it should take more than one year before that happens. There are quite a few events for JPY to reach that level such as; Credit crunch, liquidity crises, demand destruction, QE etc… The Fed is covering up the banking crisis with BTFP, and excess liquidity from which you can tell historical amount of Reverse Repo. I suspect the Fed is unofficially allowing banks to do installment repayments, looking at the current repayment pace of BTFP. Also the government is buying back treasury bonds to add more liquidity to the market against QT. They are too afraid of what is to happen next Anyways 100 level needs to be backed up by negative economic events. I expect the leveraged loans will completely ruin the Fed and the government’s plans.
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⚡ The yen strengthened more than 1% to as much as 142.8 against the dollar, unwinding several days of declines on speculation over a Takaichi victory
Ishiba, who has served in several senior roles including defense...
It's going to be an exciting week ahead.
Let's start the race! 🏁
I always say that when the yield gap between U.S. and Japanese 2-year bonds narrows, the yen strengthens. If this yen appreciation turns into a trend, the carry traders will face increasing foreign exchange losses. This, in turn, lowers their risk appetite for carry trades.
By the way, the resolution of the 10Y-2Y inverted yield curve is driven by a bul...
Ahead of key inflation data f...
Citi also said that the yen carry trade unwinding requires "three rate cuts by the Fed, and at least six months."
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