Sunday, September 14, 2008

The Primacy of the Yen

upon opening my oanda account this evening I find myself the victim of a dramatic whipsaw in the nippy. the ill-conceived long USD/JPY position I opened Friday got stopped out, as did the AUD/JPY long mentioned in the previous post. GBP/JPY is still in play, however.

so my outlook for a carry trade revival may need revision before too long, but except for the brief break below 105.5 on USD/JPY, all the other /JPY pairs have held their lows of the last couple weeks so far. for now, we'll just see how it goes.

most financial market observers (even the ones I respect -- hi Otto!) have been exclaiming that it's been All About the Dollar. I feel obliged to take issue with that.

since at least 2005 the Yen has been the motive force in the currency markets, and by extension the financial markets at large. the liquidity panics of 2006, 2007, early this year, and the events of the last few weeks, have all coincided with dramatic strengthening of the Yen against every major currency.

the biggest money in the forex markets has been, and likely will continue to be made by positive carry leveraging on the one hand, and timely bets on the violent unwinding of the carries that have been built up on the other hand. a fund that can play both sides of this with success has no need to pay much attention to the movements of the US Dollar Index.

as for me, I'm just learning.