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Some Fundamental questions

  • #1
  • First Post: Mar 17, 2011 9:01pm Mar 17, 2011 9:01pm
Very much in learning phase and have been watching the recent markets reactions to interest rate, employment figures etc and seeing how it can knock charts about.

There are a couple of things I cant fathom however.

Why after the earthquake in Japan did the Yen strenghten so dramatically, especially with the BoJ printing so much money ? Is it an expectation of inflation rising in Japan ?

Why this morning with G7 intervention did the USD/CHF soar a 100pips ? Even more strange to me as the UN decision on Libya, I would have thought, send money to safe havens (such as the CHF ?

Inputs and opinions would be most welcome.
  • #2
  • Mar 17, 2011 9:08pm Mar 17, 2011 9:08pm
Quoting Jeheil
Why after the earthquake in Japan did the Yen strenghten so dramatically, especially with the BoJ printing so much money ? Is it an expectation of inflation rising in Japan ?

Japan will need to borrow a ton of money. They will do this by issuing bonds. These bonds will compete with other counties needing to issue bonds. So, they will pay a higher rate to attract buyers.

The outlook for the yen on a longer term basis will not be so positive, in my opinion.

The US will likely have to pay higher rates as well.
  • #3
  • Mar 18, 2011 8:24am Mar 18, 2011 8:24am
Quoting Jeheil
Very much in learning phase and have been watching the recent markets reactions to interest rate, employment figures etc and seeing how it can knock charts about.

There are a couple of things I cant fathom however.

Why after the earthquake in Japan did the Yen strenghten so dramatically, especially with the BoJ printing so much money ? Is it an expectation of inflation rising in Japan ?

Why this morning with G7 intervention did the USD/CHF soar a 100pips ? Even more strange to me as the UN decision on Libya, I would have thought, send money...
It was because of this: “The speculation was that Japanese life and casualty insurers will repatriate dollar-denominated assets to secure funds in the wake of the earthquake,” Yosano told reporters in Tokyo yesterday.

that quote was taken out of that article: http://www.bloomberg.com/news/2011-0...-recovery.html

In the long-term the yen will probably anyways fall. Cause if they really have a strong nuclear fall-out, then guess who will buy their maybe radiated products? nobody, or only very few countries.
Then the economy will crash.
Also they still need to clean up the cities that were destroyed by the tsunami.
For me, yen is down for the months to come.

As for the chf, I am also not sure why it sored. Maybe it has to do with how the national banks are then finally selling the yen. but no idea, maybe somebody else has a more educated opinion on that.
  • #4
  • Apr 4, 2011 1:05pm Apr 4, 2011 1:05pm
JPY soared because of insurance repatriation, as was already mentioned, but the CHF soared on risk aversion. CHF is a traditional "safe haven" currency. When there is turmoil perceived in the markets it will rise as investors abandon assets that are believed to be exposed to that risk and pile in to CHF. Gold, USD and even JPY can also serve this function, depending upon the situation. In this instance, the earthquake introduced a lot of uncertainty into everyone's economy. USD and JPY went wild because insurance companies needed to sell dollar denominated assets for yen to pay out policies. This ruled them out as risk aversion trade candidates for those who sought safety, so they piled into CHF. Hope this makes sense
  • #5
  • Apr 4, 2011 1:11pm Apr 4, 2011 1:11pm
Quoting civis
JPY soared because of insurance repatriation, as was already mentioned, but the CHF soared on risk aversion. CHF is a traditional "safe haven" currency. When there is turmoil perceived in the markets it will rise as investors abandon assets that are believed to be exposed to that risk and pile in to CHF. Gold, USD and even JPY can also serve this function, depending upon the situation. In this instance, the earthquake introduced a lot of uncertainty into everyone's economy. USD and JPY went wild because insurance companies needed to sell dollar...
actually he was asking why usd/chf soared at that time. meaning chf dropped at that time.

And for that I have no clue. maybe you got an explanation for that.
  • #6
  • Last Post: Apr 4, 2011 2:04pm Apr 4, 2011 2:04pm
aha. as for that, i have no idea. maybe japanese insurance companies were heavy into swiss assets? or maybe it was a risk move. sorry for the stupid answer
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