CARRY TRADE

rffrydr · Posted: Tue Feb 14, 2006 7:31 am Post subject: CARRY TRADE

FT may be all over it but the annual repatriation of Yen is underway:

http://www.bloomberg.com/apps/news?pid=10000101&sid=aVfNZYOnTejI&refer=japan

This should be good for 2% in the Yen WITHOUT shortcovering. Eu/Yen decisively broken. Next up: CRB
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rffrydr · Posted: Thu Apr 19, 2007 7:17 am Post subject:

165 euro/yen was getting to be too popular. This started coming off as major Japanese insurer went repat two days ago. Historically yen rallies start in April (the fiscal repatriation kicks it off apparently) and is looking tuff--probably ties to the Yuan.

Japanese CPI next week could put us back on track--or send us off to the races.
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rffrydr · Posted: Wed Apr 18, 2007 7:30 am Post subject:

Kiwi reversed last night.

http://www.dailyfx.com/story/dailyfx_reports/daily_technicals/Dollar_Rally_Looks_Impulsive_for_1176900331833.html

Pound set to retrace if the number of British in Santa Monica is any indication.
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rffrydr · Posted: Tue Apr 17, 2007 6:56 am Post subject:

Check out that bond chart for what a little inflation jitters can do:

http://www.dailyfx.com/story/dailyfx_reports/cross_markets_data_reaction/New_Zealand_CPI_To_Make_1176766174785.html

Econ 101 it's NOT.
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rffrydr · Posted: Mon Apr 02, 2007 8:21 am Post subject:

A different kind of carry--and part of the short interest puzzle:

http://www.businessjive.com/nss/bonistudy.pdf
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rffrydr · Posted: Wed Mar 28, 2007 8:19 am Post subject:

We can now say the G7 induced Carry adjustment went out with a fizzle. Last day in Yen fiscal year-end balancing and surprising Swiss KOF has the brakes on for now.

Next week it all comes back? With a chinese kicker?
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rffrydr · Posted: Tue Mar 13, 2007 6:56 am Post subject:

Push on Carry, both Yen and Swiss is back: triggered by LEND's credit problems no less! The japanese currency SPECULATOR will have been doubled up by now and caught in the gears of his own repatration trend until the beggining of April.

Look for weakening Japanese economy and equity hit coupled with longer-term retail outflows to keep a lid on thiis and bring the carry back yet again over the summer. Looking for pairs to exceed their lows last week. BP weakness in the face of newly hawkish BOE conditions tip off. Hard to buy the yen with that kind of differential working against you....easier to short--
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rffrydr · Posted: Mon Mar 12, 2007 8:51 am Post subject:

Sterling shows the hidden Japanese retailer:

The pound stumbles as currency speculators cut back on risk

FOR a currency that ranks third behind the dollar and euro in official foreign exchange holdings, the pound has recently been keeping some louche company. As investors scaled back their risk exposure, the roster of falling currencies contained the usual suspects. The Australian dollar, the New Zealand dollar, the Brazilian real and the Turkish lira were all marked down during the market squalls, particularly against a resurgent yen. It seemed odd, though, that sterling should behave more like those racy high-yielders than a stable reserve currency.

Sterling dropped below $1.92 on March 5th, a low for the year, having traded as high as $1.99 in January. But it was the pound's 7% fall against the yen between February 27th and March 5th--a plunge as big as the Australian dollar's--that raised some eyebrows. Was the thoroughbred pound in fact a beneficiary of the carry trade, the strategy of borrowing cheaply in Swiss francs or Japanese yen to buy higher-yielding currencies?

No one knows precisely how big a role sterling played in such trades. Most market watchers believe that Britain ranks below Australia and New Zealand as a destination for cheap borrowed funds. What is clear, though, is that the weight of speculative bets on the pound, however these trades were funded, made it vulnerable to a correction once the markets started their retreat from risk. Over the past year sterling has become a favourite of currency traders because of Britain's strengthening economy and rising short-term interest rates, according to Adrian Schmidt, a currency strategist at the Royal Bank of Scotland. Acquisitions of British companies by overseas investors have given the pound an extra fillip. Foreign central banks have steadily increased their holdings of sterling, attracted by its high yield and liquid markets.

That kind of official approval is hard to resist, and sterling's upward momentum went unchecked until recently. But for all sterling's attractions, it does not look cheap. The OECD estimates that sterling's purchasing-power parity--the exchange rate that would bring the price of goods and services into line with those of other countries--is $1.62, more than 15% below the pound's low point on March 5th. Like other asset prices, sterling had risen too far, too fast. Its recent stumble is probably no bad thing.

Source Citation: "Bad company; Sterling weakness." The Economist (US) 382.8519 (March 10, 2007)
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rffrydr · Posted: Fri Mar 02, 2007 8:22 am Post subject:

And the breaking of it..... JP Morgan recommended exiting trade today. Specifically NZ cross. Ain't done nothin' to the Aussie....yet.
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Goodfella · Veteran Poster Joined: 14 Oct 2005 Posts: 301

carry trade is bad for japan. takes investment away ---> enemy china

rffrydr · Posted: Thu Mar 01, 2007 9:11 am Post subject:

Reports of Banks buying Dollars against Yen presents itself: At-The-Money put spreads of 100bp are going for less than 40bp. Dollar doesn't have to rally, just manage to stay around where you entered for the interest differential to take you home. 60bp profit approx. $720 for less than $500 max risk, two ways to win.

--Only if BOJ can keep a cork in it.
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rffrydr · Posted: Thu Mar 01, 2007 8:47 am Post subject:

Yen continues "correction." Chart looks solid with three bottoms on a quarterly trend support line. Momentum and trend have both swung in it's direction:

http://www.bloomberg.com/apps/news?pid=20601101&sid=a07p.6OjH6dw&refer=japan

Wantanabee says of unwinding, we ain't seen nothing yet. Estimates 10-20 trillion yen. BOJ buying dollar yen to try to smooth things out. Again, See G7.

Repatriation came and went last year without much effect. Reversion to the mean?

See http://www.marketthoughts.com/forum/yen-at-extremes-t2531.html

(paricularly the Simmon's article on thestreet.com down midway on the first page)
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rffrydr · Posted: Tue Feb 27, 2007 12:00 pm Post subject:

1st Test since beginning year. 1st sign of yen repatriation. Early for me, yet simmons (see Yen at Extremes) nailed it. Confirmed in Peso, Rand, Real, Kiwi--not in Australia.

Commodities showing resilence. Alot of folks hanging their hat on that negative beta. For those weary to push the buy button perhaps the double puke will be time to buy.

http://www.dailyfx.com/story/dailyfx_reports/daily_brief/Japanese_Yen_Rallies_on_Unwinding_1172578781313.html
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rffrydr · Posted: Fri Feb 23, 2007 10:37 pm Post subject:

The carry as self-fulfilling:

http://www.economist.com/finance/displaystory.cfm?story_id=8742054
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HenryTo · Posted: Thu Feb 08, 2007 9:35 am Post subject:

Or something dramatic in the Korean mortgage industry. Smile

Henry

rffrydr · Posted: Thu Feb 08, 2007 8:51 am Post subject:

Carrying on...as you might expect with all the attention. Last night's dramatically lower swiss inflation numbers spiked this japanese cousin lower in the face of turning sentiment:

http://futures.fxstreet.com/Futures/news/afx/singleNew.asp?menu=economicnews&pv_noticia=1170866090-68aa0f08-35589

As said before may just have to wait the natural year-end repatriation next month--or something dramatic on the Yuan.
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