JPY, greatest story ever told.

Question is, is this the comeback of the currently most undervalued currency in the World?

LOL...if it is and I'd say the probability is for rather than against then I'd suggest standing under something very durable because the airs going to be thick with the fallout...and I guess I like the idea that when something as been as dead and buried as the JPY for so long it's going to be a hell of a surprise for all that liquidity that has got used to the idea that that situation is ongoing.....the next big thing ? I've got my shovel ready.

Good article on p85 of last weeks economist lead me to buy some Yen.
Yesterday post the strong GDP figs I felt good about it and will now just have to see if the BOJ will hint at a raise. Big Mac index has yen at an unprecedented 40% undervalue.
Seems nobody realy knows how big the Y carry trade is but it has perpetuated this weakness for a very long time and some put it as high as $1trillion.

"some put it as high as $1trillion"....with ,or without leaverage ?

I think that is leveraged, what isn't these days.
Last time Yen started to rise in 1998 it jumped 13% in 3 days at one point when carry boyz ran for the exits.

Interesting points.. I'll be keeping my eyes open..

chump said:

"some put it as high as $1trillion"....with ,or without leaverage ?

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Don't know - that could be the unleveraged position. The total mortgage debt of the UK is over $2 trillion USD, and we're not even a particularly large market compared to America and Europe.

I think we could easily see a return to GBP/JPY 200.00 in the next six months with very little difficulty.

jbat your right, I check it out after the question. That is unleveraged amount so with multiples it is pretty large.
Nice ride so far only shame is that I did not mortgage the house on it yet.

It seems that the "independent" BOJ is quite happy with the range of 110/120 JPY to 1USD. Long gone the days of Tokyo Express. However one can never be sure what would BOJ do to protect the selling power in the US and EU markets. IMHO 114 JPY to 1 USD is possible within the next two/three months. After tomorrows closing one would have more indication re the size of the correction. One of course can never be sure how much USD will gain or most probably loose in the medium term, which will directly impact on JPY index too. It is however very interesting to follow JPY story and take good profits from the move.

TWI said:

jbat your right, I check it out after the question. That is unleveraged amount so with multiples it is pretty large.
Nice ride so far only shame is that I did not mortgage the house on it yet.

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On Friday The Telegraph reported that the top currency guy in the Japanese Treasury was saying that the carry trade was overestimated: he reckoned it was $80-$160bn rather than $1trillion, but then he would say that wouldn't he

What's interesting me is the best markets for a long/short combination to take account of further unwinding of the trade: weekend press is speculating on several hedge funds starting to struggle. So what will suffer most? Gold, silver, pound, or equities?

My money is either on £ (ie the simple interest rate spread trade unwinding) or precious metals. It's a long time since I've placed a big 'macro' trade, but I really fancy this one, if the rest of reading I'll be doing over the weekend backs it up.

So at the moment a short cable, long yen (or short GBPJPY) and long yen short silver is my preferred way of trading this (I reckon silver more at risk than gold). Any other thoughts?

Jack,

I don’t trade fx but for what it’s worth here are my thoughts.

Looks like the Yen has been strengthening against the majors of late, either through unwinding of carry-trades or anticipating such.

I wouldn’t argue with your short UK/JPY but what about, simultaneously, short US/UK? You’ll have long yen (short pound) exposure on the UK/JPY but you’ll also benefit from what I expect will be strengthening cable. My thinking here is that the majority of carry-trades will have a dollar bias so when the dollar is sold, UK/US will strengthen. Will this then be a pound-neutral/short US/JPY position? Maybe I need to get out more.

Trust the Japanese? Are you with Alec Guinness or Jack Hawkins (“Kill him, kill him”)? Jack, any day.

Good luck.

Grant.

I'm not sure how much credence to put in this given the surce ,but the carry trade MAY be much larger than thought earlier... extract from the link....

"The yen carry trade has reached 5pc of Japan's GDP. This is enormous and highly risky, as we are now seeing."

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/03/06/cngold06.xml

I'd say this is the accelarator fuel behind recent events.....we're seeing the impact in FX, gold ,&equities ....the imponderable question is how much more to come and what will it take to move it?