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Carry Trade - Affect stock Movement

Important news, pls read.

http://yahoo.reuters.com/news/articlehybrid.aspx?type=comktNews&storyID=2007-08-18T042746Z_01_T198008_RTRIDST_0_JAPAN-BOJ-MEDIA.XML

 

Carry trade become Curry trade soon.

 

yammay74, visit the following site for carry trade explanation.

http://www.gracecheng.com/forex_trading/144/The_Trader&

http://www.twnside.org.sg/title2/gtrends/gtrends165.htm

http://sg.answers.yahoo.com/question/index?qid=20070305074447AA1Iv9Q

 

Exports take a blow but some see Japan as safe haven

 

By ANTHONY ROWLEY
IN TOKYO

 

THE unwinding of yen transactions credited with pushing the Japanese currency down to a 20-year low while helping to boost the price of financial assets globally - accelerated dramatically yesterday, sending the yen soaring against the dollar and a host of other currencies. This added to the turmoil already created by credit fears and plunging stock markets.

 

The yen hit a five-month high against both the dollar and the euro while also soaring against the New Zealand and Australian dollars - just a few of the currencies that investors and speculators have been pouring into by using yen - until now. Dealers warned that worse is yet to come as individuals and institutions that have shorted yen scramble desperately to cover their positions.

'Everyone had pointed to the risks of carry trades. Now here they are,' said Luke Waddington, head of foreign exchange trading at the Royal Bank of Scotland in Tokyo. The break in yen carry trades 'is going to be vicious and many people are going to get hammered', Mark Cutis, chief investment officer at Shinsei Bank in Tokyo told The Business Times.

The surging yen is set to deal a blow to the strong exports that have helped to fuel Japan's economic recovery over the past few years. But despite this, the strong yen and other factors could turn Japan into a 'safe haven' in the eyes of investors fleeing the financial storm, said chief economist Richard Jerram at Macquarie Securities in Tokyo yesterday.

 

Against the US dollar the yen hit its highest level since March at 115.72 at one point yesterday while jumping one per cent against the euro to 155 before easing slightly at the close of Asian trading. Most dramatic of all was the 4.5 per cent surge by the yen to 80.25 against the New Zealand dollar yesterday, while also jumping to 94.77 to the Australian dollar.

Investors and speculators ranging from Japanese housewives to hedge funds and other global financial institutions have converted yen massively to other currencies over the past two years in order to take advantage of favourable interest rate differentials (known as the 'carry') between the yen and higher yielding currencies.

Transactions linked to the yen carry trades range from short-term currency market speculation - largely by Japanese retail investors - through investment in foreign bonds by yen-based investors to complex financial derivative transactions, which the OECD suggested recently could amount to as much as US$4 trillion in all.

Numerous authorities from the IMF to the Bank for International Settlements have warned that the complex and 'opaque' nature of the carry trades made them dangerous 'one-way bets'. Analysts say that for similar reasons it is hard to gauge how much of the current turbulence in financial markets is being caused by unwinding of the carry trades.

Tokyo's Nikkei 225 stock average slumped by a further 327.12 points or 2 per cent yesterday to 16,148.49 as investors dumped stocks indiscriminately to help cover losses in other areas of the turbulent markets. Dealers said there was no end in sight yet to the stock market's travails.

But Mr Jerram at Macquarie argued that various factors could combine to make Japan appear a 'safe haven' for investors. Japan still has a bank-centred financial system of which an unusual proportion of household financial assets are in cash equivalents,' he said. 'This has held back growth, but should also reduce the impact from current global events. Also 'there has been no credit boom in Japan'.

 

 

 

 

sounds bad, another bank in Europe...

 

German bank gets 17.3b euro bailout in loans crisis
Posted: 19 August 2007 0615 hrs

	Photos 1 of 1 SachsenLB logo

 


BERLIN : Germany's publicly-owned regional bank SachsenLB admitted Saturday it had to be bailed out to the tune of 17.3 billion euros by the country's savings banks because of the US sub-prime loan crisis.

The bank, which is owned by the authorities of eastern Germany's state of Saxony and had previously denied being affected by the crisis, said the savings banks had extended it a credit line.

 

Dearest Pension,

Can you pls explain why currency movement will affect stock market? And how does it affect stock market??? Am keen to learn. thank you.

 

 

time to buy currency such as usd, ringgit, aus.

 

The next big bad wave is coming but dun know when, the china inflation rate keep rising, the government is crackling their head to solved the problem, if they start to impose some restriction, certain stock counter will be affected.  

 

Yen is dirt cheap that is one of the key reason the BB borrow it to finance their investment in premium stock. The stock market oso at the mercy of Japanese bank, if they increase interest rate, the stock will fall and if they reduce interest rate, the stock will climb. Many investors when invest in stock did not take note of currency movement. Currency movement may not affect the stock immediately, once it reach certain level, the whole market will collapse. Trade with care.

 

By looking at all currency across the board, all depreciate against the yen last friday when trading start and that cause the stock market to dip. When the yen retreat, the currency across the board start to recover, stock oso recover in late afternoon and Mr Ben give a booster shot and the Nasdaq, Dow and S&P surge at night when uas market open . Next week there will be some announcement of data from USA, this may affect the stock movement.   

 

No doubt FED has cut rate but the Carry Trade maybe another worry need week if Japanese Yen rises. BB will to sell their investment for redemption if Yen rises.