Japanese Retail Refuses to Give Up
No market participant has been a greater seller of yen than the Japanese retail trader. Faced with a paltry 0.5% yield on their savings, the aging population of Japan has redirected its vast pool of savings towards much higher yielding currencies such as the British pound, the Australian dollar and the New Zealand dollar. Indeed, Japanese retail has been one of the dominant forces behind the rise of the carry trade in 2007. Bloodied but unbowed by the events of July and August, many Japanese investors continue to be sellers of yen on any rise in the currency. Japanese financial institutions raised as much as $7 Billion of fresh capital at the end of September to invest into higher yielding foreign assets. The Japanese retail bid for the carry continues to be one the primary reasons for yen’s weakness. However, even there it may not translate into much higher USDJPY prices as most of the Japanese funs will likely be directed towards the higher yielding commodity currencies such as the Australian and the Canadian dollars where the possibility of yet more rate hikes remains alive making the carry trade against those currencies much more attractive.
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07-03-2008, 09:46 PM
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