When might we be concerned by the potential for some significant unwinding of the jpy carry trade....it seems to me that the jpy is grossly undervalued, but with the BoJ's econ assessment it does not appear that interest rates their will be continuing to increase, at least for now. If the US Markets at the end of Oct are about the same as they are now, I doubt the FED cuts rates further, but if another shoe drops.....who knows. I will place no bets as to what the fed may do, but will 85....possibly $90 dollar crude influence his decision? I have heard some argue that oil is an inflationary commodity and I have heard others argue against that. Also, if we get some serious volatility in China's mkts, then that could certainly roil those still highly levered in carry trade strategies. My concern tends to lie more in the Chinese mkt scenario (volatility)....and things could then happen quickly. I believe that Asian mkt volatility is not a friend of those using these carry strategies there.
http://www.bloomberg.com/apps/news?p...9WA&refer=home
http://www.bloomberg.com/apps/news?p...zvg&refer=home
"The yen traded at 117.39 per U.S. dollar"
"The Bank of Japan yesterday cut its economic assessment in three of the country's nine regions yesterday, making it more difficult to continue the policy of gradual interest-rate increases. Japan's 0.5 percent benchmark interest rate is the lowest among major economies and compares with 11.25 percent in Brazil and 6.5 percent in Australia."
http://www.applet-magic.com/japanstat.htm
http://www.epu.jpm.my/New%20Folder/F...07/chapt13.pdf
http://bloomberg.com/apps/news?pid=2...efer=worldwide
Unwinding Carry Trade
Linear Mode
