Forex Investment and Currency Trading

Having judged that the JPY’s surge and its interaction with domestic equity market sell-offs have intensified downside risks to the Japanese economy and the financial system, the Japanese authorities have begun to take policy steps to stem adverse market moves. As for the impact of the stronger JPY on the Japanese economy, because crude oil and raw materials prices have turned down, negative effects on exports now outweigh benefits of lower import costs. In fact, the Japanese economy’s reliance on external demand has been on the rise. The ratio of exports to GDP rose to 16.2% during the year to [...]

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Correlation with vol On average, movements in JPY have been more tightly correlated with those from VIX than any major currency over the past two months. This supports the view that financial turmoil and attendant volatility have been the decisive factors in driving JPY, as investors have become concerned with potential for a reversal of carry trade in the face of widespread deleveraging.
Poor domestic fundamentals Japanese fundamentals are grim, but this spells further JPY appreciation. The epicenter of credit woes sits outside Japan, but reliance upon net exports for growth points to shaky prospects. The BoJ is likely to acknowledge [...]

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USD/JPY seems to have an on/off switch when compared to the other major currency pairs. Add to that the fact that USD/JPY liquidity can be similarly fickle. Sometimes, hundreds of millions of USD/JPY can be bought or sold without moving the market noticeably; other times, liquidity can be extremely scarce.
This phenomenon is particularly acute in USD/JPY owing to the large presence of Japanese asset managers. The Japanese investment community tends to move en masse into and out of positions. Of course, they’re not the only ones involved in USD/JPY, but they do tend to play the fox while the rest [...]

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USD/JPY is one of the more challenging currency pairs amount the majors and trading in it requires a higher degree of discipline and patience. Where other currency pairs typically display routine market fluctuations and relatively steady, active trading interest, USD/JPY seems to have an on/off switch. It can spend hours and even days in relatively narrow ranges and then march off on a mission to a new price level.
USD/JPY can offer some of the clearest trade setups among the major pairs. When you’re right in USD/JPY, you’ll also know it pretty quickly. The key to developing a successful trading game [...]

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JPY is surging across the board in the current environment of risk reduction
It is continues to see risks skewed toward further force liquidation related to margin calls of high yielding currency positions on the part of Japanese retail investors, particularly NZD/JPY.
That unwinding will be excerbated by Japanese repatriation in the lead up to the fiscal half year-end in September.
The chart below highlights the period of the sub prime meltdown in mid 2007, which also happened to coincide with the lead up to fiscal half year end, and significant repatriation flows back into Japan (bond flows increased by a factor of [...]

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