After Group of 7 meeting this past weekend, yen started off to become weaken again aross the board. Most medias and market players have turned into Yen-Bear again because of interest rate differencies will persist. Well it is true that the interest differencies are not quite as narrow as you can ignore when investing, but on the other hand, a volatility of currencies is also high enough to cancel out a profit from the differencies. There is always a catch, i believe, with a free lunch.
There was also a warning out from officials of G7, "Markets should be aware of risks stemming from one-sided bets, particularly on foreign-exchange markets." I am totally agree with this warning, and this may lead a player to reconsider about thier carry trade positions, holding high yield currencies with financing in Yen.
Watching a Yen-crosses moving in Europe market, i do not see a strong streem of yen selling presures so far. This might be signalling a begining of a mid term correction for Yen-Short.
Meanwhile, a month of Feb is a month of a coupon payment for US treasury, and a seasonal cash flow back to Japan historically gets started for a fiscal year end in March. I am not quite sure how much of them would be convert into Yen or reinvested themselves into the US treasury again. I am believing an invester will cash them into Yen, and the Yen is getting to be stronger within few weeks from now.
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Wait a second, if you are always Dollar Bull, does that not mean that you are inherantly yen bear? I was quite surprised by the current trend, and feel it will correct itself soon. Historically, over the long term Yen always strengthens so the pendelum will swing soon.
To Avoid Missunderstandings
I stated that I would put my comment and scope of FX in always dollar bull point of view. Now i need to adjust it bit. Yes i will be bull with US dollar for some time being, I can be a JPY bull at the same time. I will express my JPY bulls in English and my USD bulls in Japanese.
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