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  • The yen (FXY +2.9%) spikes higher, bringing dollar/yen back below ¥96 amid rumors of busted carry trades and hedge fund liquidations. Should today's move be sustained, it would be the largest single-day drop for the pair since the 2010 flash crash. BofA's MacNeil Curry suggests the next stop in ¥91. Japan stock ETFs take it hard: The iShares Japan Fund (EWJ -2%), WisdomTree's Hedged Equity Fund (DXJ -4.9%).  [View news story]
    It is my opinion the "busted carry trades and hedge fund liquidations" are the real reason for today's market decline and not the media's knee-jerk response that the decline is due to fears of reduced quantitative easing. Note that today's volume was normal so it would appear that only those who had to sell, did sell. Who had to sell? Hedge fund mangers were forced to cover their yen shorts in face of rising yen valuations. So they sold recent U.S. equity positions to garner enough dollars to close out their yen shorts --- a phenomenon referred to as "unwinding the carry trade."
    Jun 12, 2013. 02:55 AM | Likes Like |Link to Comment
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