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Barron, thanks a lot for taking the time to explain all that. i'm trying to short the dollar as much as i can, i've have a leveraged position on gold, so i think ill end the USD/JPY short i have becuase it's not doing well despite the dollar struggling. likely for the reasons you outline.

ill look into another currency to short against the dollar, although right now i'm thinking maybe a punt at oil.

yep it is 5.75% in the uk, that's about as far as my knowledge goes lols.

thanks again, both useful and interesting.

john

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np.

but i think you took what i said about the JPY/USD and inverted the conclusion i'd draw.

i just gave possible reasons as to why the market has behaved the way that it has.

what is more important is where we're at now and what might happen going forward.

i'd be long the JPY/USD right now. exiting a trade "b/c it isn't doing well" as a result of an explanation as to what might have happened to result in that performance i don't think is a good idea.

the yen is definitely undervalued vs. the dollar at the moment imo.

the fundamental forces have been at work for some time and have taken global risk aversion to move from the mark at which i had an 80% + signal (123.18 vs. the dollar). risk aversion forced people to close out of risky asset positions and repatriate money to japan.

the yen is still very cheap in real terms vs. the dollar (close to a 20 or 30 year low...possibly a record low but i'm not sure about that...that 123.18 mighta been a record, not sure). the Economists's (rudimentary) PPP calculation put the yen at 121 to be some 25% undervalued vs. the dollar.

now, their PPP index isn't tradeable for a ton of reasons we don't need to get into now but it shows at least some roundabout figure of how cheap the yen is relative to the dollar.

i'd hold onto that long position if i were you.

oen of the main reasons is the asymmetry of exepcted returns for that trade. if the yen falls too much more, larger economic flows will start to overwhelm the carry traders. investments in japan would become even cheaper as would their exports etc. which would increase the demand for them and thus provides a floor to how much lower the yen could fall.

on teh other side, your expected returns are far less likely to have the same relative cap put on them since it would take a much larger move in the yen for the reverse economic flows to occurr given the undervalued position it finds itself in at the moment.

hope this helps,
Barron

PS- i've noticed that your portfolio's additions lately are pretty likely to be highly correlated. you might want to watch this as it could expose you to diversifiable risks unnecessarily.