The Yen’s wild ride has grabbed the attention of many investors and traders. You will read and hear innumerable amounts of opinions about what this means and where things are surely headed. The Japanese authorities are always being discreet about their currency intervention
In case you are curious, the tourism industry is poised to become Japan’s second-largest export sector, trailing only automobiles and surpassing electronic components. The Yen’s depreciation against the dollar has made Japan an incredibly attractive destination for international travelers.
This article from Nikkei Asia may be of interest.
Here is a section:
Currency market volatility is back with a vengeance, fueled by uncertainty over the U.S. presidential election, and it is upsetting one of the most popular trades in the yen.
The Japanese currency strengthened to around 155.30 to the dollar in Tokyo at one point Thursday, reaching a roughly one-month high. It had been trading in the upper 158 range the day before.
“We’re finally seeing a pause in dollar strength,” a currency dealer at a Japanese bank said of recent market movements. “The market is entering a transitional period.”
The sharp gain followed a Bloomberg Businessweek interview published Tuesday in which Republican presidential contender Donald Trump criticized the yen’s weakness against the dollar as a burden on US exporters.
One of the biggest trades in the yen is the carry trade – borrowing yen at low interest rates to buy higher-yielding currencies. This depends on having stable, predictable exchange rates. An unexpected rise in the yen can wipe out the profit earned by exploiting the interest rate gap.
Bets against the yen had been rising. Non-commercial positions shorting the yen against the dollar had reached a net 182,000 contracts as of July 9, a record high, according to the U.S. Commodity Futures Trading Commission.
“These inflated short positions are being unwound, leading the yen to strengthen,” said Hirofumi Suzuki, chief foreign exchange strategist at Sumitomo Mitsui Banking Corp.