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Unusual given past patterns, the dollar (UUP -1.7%) is being unloaded across the board and in...

Unusual given past patterns, the dollar (UUP -1.7%) is being unloaded across the board and in size along with stocks selling off. The euro (FXE +1.5%), cable (FXB +1.8%), the yen (FXY +3.1%), the aussie (FXA +1.1%), and the loonie (FXC +1.3%) are all sharply higher vs. the greenback. The Dow's now off 86 points.
Comments (14)
  • All emanating from a JPY carry trade unwind. I suspect this will be temporary.
    6 Jun 2013, 12:34 PM Reply Like
  • i am hoping so whitehawk. holding DXJ and TM and taking a beating on both.
    6 Jun 2013, 12:52 PM Reply Like
  • Not a carry trade
    6 Jun 2013, 03:54 PM Reply Like
  • Wait a minute! What about that radical increase in interest rates that's supposed to be imminent? What, ten-year yield is down over 4% today?

     

    Those that dumped all their yield stocks and bond funds got faked out.
    6 Jun 2013, 12:43 PM Reply Like
  • Agree, getting faked out of positions is not good trading or investing. However, this unwind is serious in that it shows just how much highly levered one-sided interlinked bets can rattle markets, regardless of rates and unemployment numbers. GiG, until it hits the VAR limits triggering a run for the exits. Enjoy the show.
    6 Jun 2013, 12:51 PM Reply Like
  • This is actually not a bad place to start building a position in DXJ and short FXY. Remember, Abe and Kuroda have not been on the job that long - got to give them some time for the policies to work.

     

    Many were skeptical of the effectiveness of quantitative easing when the Fed first implemented it (some still are). It's done a pretty good job here lifting the market.
    6 Jun 2013, 02:57 PM Reply Like
  • It is a good time to short FXY. We needed a rally in the JPY to clear out the weak shorts, and the long-term short yen story is still very much intact.
    6 Jun 2013, 06:24 PM Reply Like
  • If USD plunge is temporary (to completion of JPY unwind?) how long do you see effect lasting?
    Thx
    6 Jun 2013, 12:50 PM Reply Like
  • I mentioned the other day that we could see USDJPY gains erased to 93, a key springboard level just a few months ago. When we get moves in the JPY and a series of linked trades (long USDJPY, short JPY pairs, long dixie, long equities-esp Nikkei which has driven all the other equities, short PMs, short Treasurys) the unwind violently reverses all these. Note though that the spike in PMs does not hold much conviction in this move - that is telling, and those touting significant bullishness in PMs ought to pay heed.
    6 Jun 2013, 12:58 PM Reply Like
  • This correction is solely about the Nikkei. The market is calling the BOJ's bluff, and if Kuroda can't shock and awe the sceptics then Abenomics may blow up on the launchpad.
    6 Jun 2013, 01:08 PM Reply Like
  • If Abe can flood the market with Yen, and it doesn't even drive down its value, then, while it doesn't aid exporters, Japan wins in another way because it's the world's largest overseas investor and can buy even more positions cheaply. This is an aspect of the overall Japan economic situation often overlooked.
    6 Jun 2013, 01:15 PM Reply Like
  • Agreed. Another problem is that the historically strong yen has hitherto incentivized Japanese managers to offshore a significant portion of their manufacturing and assembly operations, which limits the impact of a lower yen on the export sector.
    6 Jun 2013, 01:30 PM Reply Like
  • good points that i really hadn't considered
    6 Jun 2013, 08:14 PM Reply Like
  • Actually Yen is a good trade now. Abbe can't afford another round of QE meaning that they can't dilute again.
    7 Jun 2013, 01:14 AM Reply Like
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