Yen continued its fall today while the
AUD/JPY, one of the carry trade locomotives of the past, fell from 98 to 96 within two days since the start of the week. Further carry trade unwinding was caused by the speech of Henry Paulson,U.S. Treasury Chairman. He said that it is unlikely that cutting an interest rate will be a saving action for a mortgage crisis, which has a more complicated system than just depending on the Fed’s interest rate.
Japanese yen gained about 1% in 2 days against pound, dollar, New Zealand dollar and euro (which along with the U.S. dollar looks firmer than others). As the recession in the financial sector is threatening to jump on the whole economy, carry trading becomes less and less attractive, giving more strength to such low yielding currencies as yen, and dollar, which is very likely to see a interest rate cuts cycle now.
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