Forex Investment and Currency Trading

The analysis of the seasonality of the Japanese yen (JPY) is with respect to the assumption that Japanese firms tend to repatriate foreign profits ahead of fiscal year-end on 31 March. The JPY tends to strengthen versus major currencies and the Korean won (KRW) in January and February and weaken in April and May. This is in line with the fact that Japanese repatriation ahead of the fiscal year-end typically peaks at the end of February. The pattern of JPY appreciation in Q1 followed by depreciation in April and May is clearer for GBP-JPY, CAD-JPY, AUD-JPY, NZD-JPY, and JPY-KRW than [...]

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The past two weeks has witnessed a sea change in the way the Yen has traded. ‘Risk off’ days are now associated with Yen weakness rather than Yen strength, the opposite of the pattern observed through this financial crisis. This is further highlighted by the decoupling of the Yen crosses and Yen TWI from moves in equity markets. What has changed?
The market now realises that the Japanese economy has difficulties
One specific reason, why more Yen selling may occur is the realisation that the Japanese economy is facing extreme difficulties. The economy shrank by 12.7%qoq annualised in Q4. This revelation appears [...]

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A trend that has started to unfold in the FX markets in the past couple of weeks; the JPY is losing its lustre as a “safe haven” in times of equity market weakness.  The correlation between the S&P 500 and USD/JPY has dropped significantly since the start of the month, weakening to a more or less equivocal +56% and while the EUR/JPY correlation remains strong at +78%, the trend is clearly weakening (the relationship’s tightness peaked at +97% in early December).
While EUR/JPY has maintained a generally strong, positive correlation with equities over the past 18 months or so, there have [...]

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Correlation between equity markets and USD/JPY (and EUR/JPY, NZD/JPY, GBP/JPY) has broken down completely which has led…
To the leverage community covering their short USD vs. JPY positions which has pushed USD/JPY above 92.00 and may target 94.00 (very key resistance)
The volatility skew is collapsing as well.  At one point last week, a 6 month, 25 delta JPY Call Option was 8 vols more expensive than a 25 delta JPY Put Option…that is now down to 4 vols.  A huge collapse…
NO ONE THINKS WE ARE GOING TO 85 anymore…

What happened to the locals…

We were seeing strong flows from the Japanese community [...]

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