Post-election breakdown of DOLLAR-YEN[Target 100]
A short post, with few important points:
With record low interest rates globally, the carry trade with the short-side in yen is somewhat losing its popularity. Some of the reasons why are:
=> The carry premium isn't worth the risk any longer. Lately currency markets have been quite volatile, question is whether this will continue. If we get a somewhat more stable environment in developed markets, carry sharks might look elsewhere for the following reasons...
=> Record low rates globally, even further squeezing the positive carry spread, however now that all the key rates globally are at the ZLB (prospects even to go below it), the importance of inflation is ever more accentuated. Why'd you even enter a long carry with a short side in yen given the inflation differential, with Japan potentially going into a deflationary environment?
=> Lastly, we're in a new paradigm where it's questionable how long would it take for emerging markets to recover from the virus, and the grading of their government bonds is starting to become questionable.
There are other points of course, but principally Biden after all might get a weaker dollar after all, thanks to MMT. On one side, too little stimulus implies a potential credit crunch/crisis, and too much stimulus= devaluation. Obviously, devaluation is without any doubts the better choice.
The rest is summarized by the chart.
-Step_ahead_ofthemarket
________________________________________________________________________________________
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Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
With record low interest rates globally, the carry trade with the short-side in yen is somewhat losing its popularity. Some of the reasons why are:
=> The carry premium isn't worth the risk any longer. Lately currency markets have been quite volatile, question is whether this will continue. If we get a somewhat more stable environment in developed markets, carry sharks might look elsewhere for the following reasons...
=> Record low rates globally, even further squeezing the positive carry spread, however now that all the key rates globally are at the ZLB (prospects even to go below it), the importance of inflation is ever more accentuated. Why'd you even enter a long carry with a short side in yen given the inflation differential, with Japan potentially going into a deflationary environment?
=> Lastly, we're in a new paradigm where it's questionable how long would it take for emerging markets to recover from the virus, and the grading of their government bonds is starting to become questionable.
There are other points of course, but principally Biden after all might get a weaker dollar after all, thanks to MMT. On one side, too little stimulus implies a potential credit crunch/crisis, and too much stimulus= devaluation. Obviously, devaluation is without any doubts the better choice.
The rest is summarized by the chart.
-Step_ahead_ofthemarket
________________________________________________________________________________________
>>I do not share my ideas for the likes or the views. This channel is only dedicated to well-informed research and other noteworthy and interesting market stories.>>
However, if you'd like to support me and get informed in the greatest of details, every thumbs up and follow is greatly appreciated!
Disclosure: This is just an opinion, you decide what to do with your own money. For any further references or use of my content- contact me through any of my social media channels.
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