Biggest Yen Weekly Drop Vs Dollar In Over A Decade

Tyler Durden's picture

The Japanese posturing worked: with the yen hitting a 14 year high against the dollar, inside of 85, one short week ago, in the past 5 days the Yen staged a huge drop against the US currency, plunging by the most in over a decade, to 90.5 as of Friday close. While we are not sure what Hirohisa Fujii told Bernanke on the closed line in the past week, we do owe the boys at 33 Liberty a golf clap for managing the carry roll from the dollar to the yen with such efficacy that the stock market did not plunge. It appears the $ Plunge Enforcement Desk and the S&P Plunge Protection Desk have reached a phenomenal level of synergies.

As Zero Hedge first speculated, the rotation out of dollar funded short positions back into the traditional yen carry trade is now in process. We expect substantial weakness for the Yen in the coming weeks, even as Geithner does all he can to keep the dollar weak against the Euro, AUD, loonie and all other developing economies, where the 2008 Goldman decoupling thesis is once again playing out. Maybe this time, courtesy of Bernanke, Goldman's permabullish commodity call will finally be right. However, with gold dropping 5% on Friday accompanied by a much weaker rise in the dollar, we anticipate either continued strength in the dollar as correlation desks struggle to recalibrate their models, or alternatively for gold to spike on what could be a substantial buying opportunity. With Central Banks in dire need to buy much more gold as they diversify away from dollars, the smart money is by far on the latter.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Orly's picture

Golf clap, indeed...and it goes to you, Tyler.

Very astute observations.  A few weeks ago on this blog, I preposed that it would first be the Great British Pound Sterling, then the Euro then Yen that cratered once the equity markets reached critical mass.  I had forgotten how deeply to Japanese government is in the back pocket of the Fed.

Now, I have to totally rethink my strategery.  I thank you for that.


CounterParty's picture

A weaker Yen will be a boon for the Nikkei next week, but the Dollar strength equals Yuan strength which means China drops. Should be an interesting action in Asia Monday.

yy's picture

While I would love for the USD rotation to come true (so wide spread pain to the herd is inflicted), I am inclined to think Friday was just a knee-jerk reaction thinking that the FED would raise much sooner than expected. The more likely sober scenario is that there is some more time to spend at the casino.

john_connor's picture

Euro is about to get much weaker v. all currencies as Europe is dying on a vine due to Euro strength.  This will mitigate new Yen carry and dollar carry.  Complete Eurozone detonation T minus 6 months otherwise.  Further near term dollar weakness will be mitigated by political pressures and oil.

UK and weak link Euro countries will be toast regardless.




Cursive's picture

I don't know about timing, but I agree with this analysis.  Now, IF I knew the exact timing....

Anonymous's picture

Commodity currencies viz., Canadian, Australian and New Zealand Dollars as well as Norwegian Kroner are the safest bets. If the US dollar plunges, the pegged currencies like Chinese Yuan, HK Dollar, and UAE Dirham also may get unhinged and appreciate. Euro, GBP and Yen all have their vulnerabilities. Gold may rise still higher, but the moment it poses a threat to fiat currencies its private possession may just be banned by the governments.

CharlesBronson's picture

By God I think he has it! Pump Gold, Dump Gold, buy Dollar!

RobotTrader's picture

This guy must be bellowing with laughter at the hostess bar this evening, at the success of his "words" to stop the Yen advance.

RobotTrader's picture

Looks like the Fed and the BOJ have conspired to bring in the most powerful trading force in the world to assist in transferring the "carry trade" away from the dollar and back towards the yen.

Yes, its back to the good old days, where the Japanese Housewives are the most formidable force in the financial markets, as millions of stay at home moms who are all in charge of household finances start riverboating the salaryman's meager earnings into stock market gains.



Gordon_Gekko's picture

Just another short term - and, ultimately, meaningless - fluctuation amongst fiat currencies during their progression to the currency graveyard.

omi's picture

Best comments ever. Sexy women, somewhat trading related!

anynonmous's picture

apologies for the  link to FluffPo

Elizabeth Warren

America Without a Middle Class
faustian bargain's picture

Some nice sentiments in there, but her stumping for a new 'consumer protection' regulatory body is misguided and addresses only symptoms, not causes.

Gwynplaine's picture
Gwynplaine (not verified) anynonmous Dec 6, 2009 1:38 PM

I agree, good sentiments but no real solutions.  Adding a financial protection agency is basically increasing salary expense for the government and adding to future taxes.   If you want to help the middle class, you need to cut their tax rates and raise interest rates as an incentive to save.   Cutting taxes would also require a reduction in federal spending - and I don't see that happening.

Anonymous's picture

Aww you guys are great.

Now if I could marry this girl, the world would be a happier place!


SRV - ES339's picture

Hate to break it to you Anon, but the love of your life is not a girl... take a closer look at the hands... nice legs though... lol!

harveywalbinger's picture

Bangin' out a riff

No Jenny suprise Johnson

Its a man baby  

Anonymous's picture

It will be, "The Crying Game", for you.

Anonymous's picture

With Trischet getting ready to raise interest rate(does this guy live in Europe?),pretty soon the Euro will be headed towards 200 JPY(with the US and JP interest close to zero,and staying so for a while).And with Chinese currency pegged to the Dollar,Europe has no where to hide. Pretty soon Spain, Italy and Greece will be offering their olive oil as collateral for their debt(does gs accept payment for their cdos in olive oil?),and I will leave Ireland for the readers to add. Or they will have to go begging to aunt Angei. The question is,how many mouths is aunt Angie will be willing to feed,since we have a line of host of other bankrupt countries waiting in line to ascend to the dream team.

tom a taxpayer's picture

Ireland has:



Lucky Charms

And little leprechauns with big pots of gold.

time123's picture

UJPIX up 21.36% in just a week. If only one knew ahead of time, on Nov 30 to get in! Guess who did!


Anonymous's picture

looks like japan was indeed selling us t-bills in the background.

gold is still the best place to put your money no matter what,
something has to give in the us economy sometime very soon.

the world is moving away from the dollar so which ever way you put it go bearish dollar longterm.

Grand Supercycle's picture


USDJPY uptrend looks good so far.

Dow/SP500 bear market rally shows signs of weakness.

We will make new equity lows according to my charts and my USD indicator has been giving BULLISH warnings for several months and am still expecting a dollar rally.

My indicators can identify trend changes before they occur.

They warned me of an impending market crash back in early  *2007*


harveywalbinger's picture

Wonder twin powers

Synergize rabbit from hat

Buy shimp flied lice now