Whats responsible for the massive buys on all the jpy pairs across the board? Looking at the weekly charts for gbp/jpy and eur/jpy, those were some massive drops...huge engulfing bearish candle on my charts..even the daily looks scary. What caused it?
- #2
- Aug 17, 2007 5:34am Aug 17, 2007 5:34am
- Joined Sep 2006 | Status: Trader | 2,272 Posts
its just money
- #3
- Aug 17, 2007 7:55am Aug 17, 2007 7:55am
Whats responsible for the massive buys on all the jpy pairs across the board? Looking at the weekly charts for gbp/jpy and eur/jpy, those were some massive drops...huge engulfing bearish candle on my charts..even the daily looks scary. What caused it?
Japanese lending rates have been very low, so investors have been borrowing from Japan to finance investments in other currencies. This in itself weakens the Yen, pushing the Yen down. New investors see not only that the borrowing cost itself is low, but the Yen is sliding down against other currencies, which makes it doubly attractive (since they hope they will be able to pay back the borrowings in devalued Yen) - so they borrow more. The whole process keeps accelerating.
As long as everything is perfect in the investment world, the Yen would accelerate in it's depreciation. But as more money purs into the market, investments themselves - whether it's simple carry trades, or complex corporate paper bets - gets increasingly unstable. For example, lenders start seeking out lower & lower quality borrowers (since they have to lend money to make money); hedge funds like Sowood take riskier and more leveraged bets because investors - awash with cash - are trying to find something, somewhere, that will return that extra percent or two. Stock markets in the west shoot up, because it's easy to borrow money, and just buying the indices seems like a sure thing. Housing in the West becomes a highly speculative market characterized by outrageously sized houses being sold at appallingly high prices on ridiculously low terms to people who have no chance of keeping them once interest rates return to historical normal ranges (5-7%)
Then something bad happens to those investments. In this case it was the subprime issue and US housing that served as a trigger - but really anything would do. Investors at the late end of the stick - with the riskiest investments - find suddenly they can't pay back their lenders. So at the outside edge of the lending, everything starts to crumble. The Fed rate (for example) wasn't reduced, which caused ARM rates to at their adjustments to go up from 1 or 2% to 6-7%, collapsing the weakest home buyer market. Seeing this the largest primary lenders start refusing to lend, and start returning the money thry have borrowed. That causes the yen to start to strengthen, and in the meantime liquidity starts drying up.
As liquidity dries up, the markets start tumbling faster, houses don't get sold, risky leveraged hedge fund bets can no longer have their carrying costs serviced - which in turn causes lenders to close down even more, putting yen back (selling dollars to buy yen to repay loans), and strenthening the Japanese currency. Soon, everybody is scrambling to save what little they can, by which time the Yen gets back to what would be considered a "normal" level. And once the dust and rubble is cleared from the speculative western markets, the whole process can start again
BTW - the Yen here is more of an example than anything else. Any source of liquidity would do, and in fact most of this started not because of Japan, but because of the low interest rates provided by the Federal reserve in the Greenspan era.
- #4
- Aug 17, 2007 8:08am Aug 17, 2007 8:08am
- Joined Jan 2007 | Status: Stochastic pipster | 1,657 Posts
From a fundamental perspective?
Japanese lending rates have been very low, so investors have been borrowing from Japan to finance investments in other currencies. This in itself weakens the Yen, pushing the Yen down. New investors see not only that the borrowing cost itself is low, but the Yen is sliding down against other currencies, which makes it doubly attractive (since they hope they will be able to pay back the borrowings in devalued Yen) - so they borrow more. The whole process keeps accelerating.
As long as everything is perfect in the investment world, the Yen would accelerate in it's depreciation. But as more money purs into the market, investments themselves - whether it's simple carry trades, or complex corporate paper bets - gets increasingly unstable. For example, lenders start seeking out lower & lower quality borrowers (since they have to lend money to make money); hedge funds like Sowood take riskier and more leveraged bets because investors - awash with cash - are trying to find something, somewhere, that will return that extra percent or two. Stock markets in the west shoot up, because it's easy to borrow money, and just buying the indices seems like a sure thing. Housing in the West becomes a highly speculative market characterized by outrageously sized houses being sold at appallingly high prices on ridiculously low terms to people who have no chance of keeping them once interest rates return to historical normal ranges (5-7%)
Then something bad happens to those investments. In this case it was the subprime issue and US housing that served as a trigger - but really anything would do. Investors at the late end of the stick - with the riskiest investments - find suddenly they can't pay back their lenders. So at the outside edge of the lending, everything starts to crumble. The Fed rate (for example) wasn't reduced, which caused ARM rates to at their adjustments to go up from 1 or 2% to 6-7%, collapsing the weakest home buyer market. Seeing this the largest primary lenders start refusing to lend, and start returning the money thry have borrowed. That causes the yen to start to strengthen, and in the meantime liquidity starts drying up.
As liquidity dries up, the markets start tumbling faster, houses don't get sold, risky leveraged hedge fund bets can no longer have their carrying costs serviced - which in turn causes lenders to close down even more, putting yen back (selling dollars to buy yen to repay loans), and strenthening the Japanese currency. Soon, everybody is scrambling to save what little they can, by which time the Yen gets back to what would be considered a "normal" level. And once the dust and rubble is cleared from the speculative western markets, the whole process can start again
BTW - the Yen here is more of an example than anything else. Any source of liquidity would do, and in fact most of this started not because of Japan, but because of the low interest rates provided by the Federal reserve in the Greenspan era.
Forget about the previous answer. Sorry to say that election had nothing to do with the yen situation (like the politics have any influence on the economy, that would be known ^^ )
- #6
- Aug 17, 2007 12:42pm Aug 17, 2007 12:42pm
- Joined Jan 2007 | Status: Stochastic pipster | 1,657 Posts
- #8
- Aug 17, 2007 1:16pm Aug 17, 2007 1:16pm
- Joined Sep 2006 | Status: Trader | 2,272 Posts
its just money
From a fundamental perspective?
Japanese lending rates have been very low, so investors have been borrowing from Japan to finance investments in other currencies. This in itself weakens the Yen, pushing the Yen down. New investors see not only that the borrowing cost itself is low, but the Yen is sliding down against other currencies, which makes it doubly attractive (since they hope they will be able to pay back the borrowings in devalued Yen) - so they borrow more. The whole process keeps accelerating.
As long as everything is perfect in the investment world, the Yen would accelerate in it's depreciation. But as more money purs into the market, investments themselves - whether it's simple carry trades, or complex corporate paper bets - gets increasingly unstable. For example, lenders start seeking out lower & lower quality borrowers (since they have to lend money to make money); hedge funds like Sowood take riskier and more leveraged bets because investors - awash with cash - are trying to find something, somewhere, that will return that extra percent or two. Stock markets in the west shoot up, because it's easy to borrow money, and just buying the indices seems like a sure thing. Housing in the West becomes a highly speculative market characterized by outrageously sized houses being sold at appallingly high prices on ridiculously low terms to people who have no chance of keeping them once interest rates return to historical normal ranges (5-7%)
Then something bad happens to those investments. In this case it was the subprime issue and US housing that served as a trigger - but really anything would do. Investors at the late end of the stick - with the riskiest investments - find suddenly they can't pay back their lenders. So at the outside edge of the lending, everything starts to crumble. The Fed rate (for example) wasn't reduced, which caused ARM rates to at their adjustments to go up from 1 or 2% to 6-7%, collapsing the weakest home buyer market. Seeing this the largest primary lenders start refusing to lend, and start returning the money thry have borrowed. That causes the yen to start to strengthen, and in the meantime liquidity starts drying up.
As liquidity dries up, the markets start tumbling faster, houses don't get sold, risky leveraged hedge fund bets can no longer have their carrying costs serviced - which in turn causes lenders to close down even more, putting yen back (selling dollars to buy yen to repay loans), and strenthening the Japanese currency. Soon, everybody is scrambling to save what little they can, by which time the Yen gets back to what would be considered a "normal" level. And once the dust and rubble is cleared from the speculative western markets, the whole process can start again
BTW - the Yen here is more of an example than anything else. Any source of liquidity would do, and in fact most of this started not because of Japan, but because of the low interest rates provided by the Federal reserve in the Greenspan era.
- #14
- Aug 18, 2007 10:28am Aug 18, 2007 10:28am
- Joined Jul 2006 | Status: Charts + PA > * | 3,251 Posts
Whats responsible for the massive buys on all the jpy pairs across the board? Looking at the weekly charts for gbp/jpy and eur/jpy, those were some massive drops...huge engulfing bearish candle on my charts..even the daily looks scary. What caused it?
Weekly DJI futures doji in the week of the 15th-22nd July as well as later on some daily pins => breakdown.
I prefer that one line to an essay, since those dojis and Pins also have real actually tradeable price levels on the chart to use entries and stops with as opposed to all this newsflinging.
Trust price. Know yourself.
- #16
- Aug 18, 2007 11:13am Aug 18, 2007 11:13am
You answered yourself there
Weekly DJI futures doji in the week of the 15th-22nd July as well as later on some daily pins => breakdown.
I prefer that one line to an essay, since those dojis and Pins also have real actually tradeable price levels on the chart to use entries and stops with as opposed to all this newsflinging.
1)Run (don't want to get hit in the head by a falling apple) = average investor
2)Pick it up and eat it <- scalper
3)Realize a lot more may fall, spread a blanket to catch them <- intermediate term trader
4) figure out if it is the time and place for apples to be ready, and if so spread your blankets around lots of apple trees <- position trader
5)Do like 4, but spread lots of blankets around all sorts of trees, in the chance they may be apple trees as well <- institutional investor
6) Do like 5, but buy blankets against future apple earnings<- hedge fund manager
7) Look to see if it's the time & weather for apples to be falling, and how good or bad the harvest is, and go long or short w/r to the demand for apples <- Warren Buffet
8)Go home and think about gravity, and eventually die richer than 1-6 put together, and more famous than 7 <- Isaac Newton
There's room in the world for all
