Re: October [censored] thread
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anyone know why the yen has been struggling vs the dollar in the past week or two despite dollars significantly poor performance vs GBP?
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the first thing that comes to mind is the japanese dependence on the US as an export market (though less so more recently) vs. the british dependence on the US (which is significantly less. UK needs europe more thant he US by a long shot).
so a downturn in teh US cuold lead to export led slowdown in growth in Japan and thus a hold on interest rate increases planned by the BoJ.
while in the UK, the BoE is simply holding rates as they are right now (i.e. at a relatively high level). if the UK housing market (which is hotter than the US one was last year) collapses, then there may be an expectation of the BoE reducing rates. but as it stands, england is doing well (save northern rock obv) and i don't thinkt he market is expecting lower UK rates any times soon.
the US on the other hand has already had significant rate drops.
one explanation as to why the JPY/USD didn't rise so much is that short sales of the yen could have increased as demand for risky assets again shot up (as seen by the record setting MSCI emerging market index's 25% gain recently). so outright yen shorts (i.e. the carry trade) could be offsetting the weakness in the USD as a result of the fall in interest rates int he US relative to japan.
the UK has no such short sales since it's current rate is already at 5.75% (i think...might be 5.5 or 6.0...too lazy to check though i'm pretty sure it is at 5.75)
any other thoughts/criticisms are welcome (i.e. please comment so we can all learn more [img]/images/graemlins/smile.gif[/img] )
Barron
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