Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

Will Yen Carry trade create further weakness in Asian Markets

56 sec read


 

CMP : 1 Dollar = 92.31 Yen
 
Yen is strengthening against dollar and Dollar is Strengthening against major world currencies. This is a Sign of Weakness this could probably lead to  Yen Carry Trade in Asian Markets. As Japanese exporters sell dollars yen is keep on extending its
gains since April  2009
 
Chart Shown above is a 2 Year Charts of USD/YEN and the overall trend shows that Yen Keeps on Strengtening agains dollar
since OCT 2007
 
Why Yen in Appreciating?
 
Yen has been for years the currency with the lowest interest rate among all major currencies. Therefore if someone wanted to buy an asset that pay a dividend like income or if that asset would appreciate, they buy by lending in yen, and converting that currency in the currency they use the buy the assets.

The asset in question can be (and have been) not other than another currency paying a higher interest rate.

When asset prices decline (as has been the case in stocks, and commodities, etc), the loans that were made in Yen have to be paid back.

Therefore, now people need to buy yen. Since there have been an accumulation of position over a long period of time, the buyers of Yen all of sudden overcome the sellers of Yen. Supply and demand then dictates a higher price for Yen, and in a shorer period of time.

Once the trend is set, speculators use the trend to drive the price of Yen even higher.

 
More Readings on Yen
 
Rajandran R Founder of Marketcalls and Co-Founder Algomojo. Full-Time Derivative Trader. Expert in Designing Trading Systems (Amibroker, Ninjatrader, Metatrader, Python, Pinescript). Trading the markets since 2006. Mentoring Traders on Trading System Designing, Market Profile, Orderflow and Trade Automation.

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