Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Peloton 35% CRASH a Lesson of What Happens When One Over Pays for a Loss Making Growth Stock - 1st Dec 21
Stock Market Sentiment Speaks: I Fear For Retirees For The Next 20 Years - 1st Dec 21 t
Will the Anointed Finanical Experts Get It Wrong Again? - 1st Dec 21
Main Differences Between the UK and Canadian Gaming Markets - 1st Dec 21
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Yen Carry Trade Alert - Gold And Financial Markets

Stock-Markets / Yen Carry Trade Jun 26, 2007 - 02:03 PM GMT

By: Christopher_Laird

Stock-Markets For the past several weeks, I have been telling subscribers of my concern about the Yen again being at a low level. This present level has led to upsurges in the Yen, as traders unwind Yen carry trades. World stock markets and gold have sold off when this happens, as in late February of this year. The Yen hit a 5 year low days ago.


Japanese Finance Minister Omi stated Monday that people should not be making ‘one way bets on the Yen' – the same terminology that the ECB used just before the Yen strengthened a great deal in late February, and led to world stock crashes. The BIS also stated this week that the present low level of the Yen is ‘anomalous'.

"Over the weekend, the Bank for International Settlements warned in its annual report about the risks of carry trades and said there was "clearly something anomalous" about the yen's weakness...A drop in Japanese shares also kept the market on edge for any potential rush out of risky positions such as carry trades." Reuters

Take a look at this chart of the Yen, gold, and Dow Jones world stock index.

US markets

Gold is languishing. There are concerns about the US banking situation after huge losses in two Bear Stearns hedge funds that made billion dollar bets on US subprime mortgages. The Dow has reacted quite negatively to revelations on the Bear Stearns hedge fund mess Friday, and now Monday. I believe gold has been anticipating this kind of trouble for weeks, due to rising interest rates. Gold has also been concerned about the prospect of another Yen carry trade stock market sell off.

Chinese markets

With the Chinese stock markets looking shaky, the last thing world stocks need is pressure on the Yen carry trade to unwind again, as it did late February, and the Yen strengthened 6% in roughly a week, causing waves of world stock sell offs. The US Dow had one horrible 500 point drop during that episode, but appeared to shake off the weeks long Asian selling then. That helped to quiet the situation.

It is always possible the Asians markets will rally again, but the prospect of new Yen carry unwinding is quite high right now.

Gold in this situation

I have been concerned that Gold does not like rising world interest rates, which puts a lot of pressure on the housing market, stock markets, and subprime derivatives which are extremely sensitive to small changes in interest rates. See the present Bear Stearns hedge fund disaster. I believe that gold had been telegraphing these concerns before last week. Gold has not reacted in a bullish way to the USD falling again to the low 82 range, nor has gold reacted bullishly to rises in oil recently – indicators of negative gold sentiment. My subscribers have been informed of these concerns for two weeks.

Leverage concerns

Gold is presently reacting to financial deleveraging concerns overall. If I was to choose one concern over all others, it is the amount of leverage in all markets. Rising interest rates threaten this leverage, and will lead to serious deleveraging at some point this year.

Changing interest rates are very dangerous to carry trades, first the Yen carry, but also involving the Swiss Franc. Carry trades are again poised to unwind.

Also, gold does not like the competition of rising world interest rates, as conservative investors are attracted by higher bond yields.

All things considered, the world is again poised for some serious stock sell offs, and in many respects the same ingredients are present that led to the last wave of Asian sell offs in late February – again, see the chart above.

The Prudent Squirrel newsletter is Chris Laird's macro economic gold newsletter. It is 44 issues a year, published Sundays. Subscribers get mid week email market alerts. Subscribers are already aware of the concerns in this article.

Stop by and have a look.

By Christopher Laird
PrudentSquirrel.com

Chris Laird has been an Oracle systems engineer, database administrator, and math teacher. He has a BS in mathematics from UCLA and is a certified Oracle database administrator. He has been an avid follower of financial news since childhood. His father is Jere Laird, former business editor of KNX news AM 1070, Los Angeles (ret). He has grown up immersed in financial news. His Grandmother was Alice Widener, publisher of USA magazine in the 60's to 80's, a newsletter that covered many of the topics you find today at the preeminent gold sites. Chris is the publisher of the Prudent Squirrel newsletter, an economic and gold commentary.

Christopher Laird Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in