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Mission Accomplished: Relentless USDJPY Buying Erases Overnight Market Drop
UPDATE: Stocks have roundtripped from their voyage into fantasy...
As we predicted an hour ago when the USDJPY was 50 pips lower, today's aggression against stocks would not stand. So, lo and behold, one or more central banks decided to aggressively collect 6J (USDJPY) liquidity rebates from the CME and have bought the pair in a straight line since this morning. And sure enough, after it dropped notably just a few hours ago, the NASDAQ and S&P is now back in the green, where it belongs in a "market" as rigged as this one.
The FX rigging will continue until futures are green
— zerohedge (@zerohedge) September 23, 2014
Yeah that just happened...
Fun-durr-mentals...
as AAPL buying panic ensues...
But bonds ain't buying it...
Charts: Bloomberg
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Who and why?
You call that a ramp!!?
http://www.marketwatch.com/investing/Currency/USDJPY/charts
Whoopdy Doooo!
Can someone explain this? This USD/JPY ramp is literally everyday on ZH and I don't fully understand it. Is it basically US firms borrowing yen interest free from Japan?
Carry trade. Borrow money today in JPY at 0 interest and pay back later in JPY which are worth much less to buy back. Not rocket science and bread and butter to the Banksters..........Borrow money for free, invest in things (Anything) which generates a real return (Treasuries, IT WOULD SEEM) then pay back the Yen at a lower rate. Make money on both the carry and the interest.
Always works, until it doesn't...................
Economies teeter on "The Margin", where the margin is analogous to the US Great Lakes. Small as the volume of water the great lakes contain relative to the total volume on earth, what would happen to the world if the Great Lakes vanished?
The less "currency" in local circulation, the weaker that currency. As a currency weakens, the yield on the foreign holdings of stronger currencies increases -even though the cost to purchase imports increases and the profit on exports decrease (always relative to strength).
The move in the yen equals about 10% to date, or 97 to 107.
Therefore, selling the 10 year US Treasuries bought at 2.4% now return a discounted 10% profit, especially that which was on margin. The proceeds from the margin can be reinvested and re-margined as this selling reduces demand and increases the yield. The Toyota's built in San Antonio, Tx. still sell at $34k, but profit is now up 10%, same for those built in Japan, so long as the production inputs are staggered (esp raw material and wages). Since China is pegged to the USD, imports (aka inflation) is now a discounted 10% higher with China taking a hit on exports that must absorb the cost increase, thus slowing growth.
In other words (as if this could be explained in less than an encyclopedic volume of explanation), in this highly integrated and yet fractionalized international economy, every X% swing in one currency has a disruptive effect on many others and the breaking point will only be reached when these swings become so unpredictable that a wage increase occurs (making the currency stronger by centralizing currency), for instance, just when the currency becomes much stronger, igniting rampant inflation and the central banks can always control this by flooding currency into that economy.
The beggining of the end will start with erratic curreency moves that the central banks cannot preplan for. Unable to impliment long range policy tools in this enviornmnet they will become increasingly dependant on the short term soloutions and the ral indicator of the end will occur when a short term soloution has to be reversed and then switched back.
It has nothing to do with "firms" or "borrowing". It has to do with FX trading by high speed computers and, as we learned recently, by central banks with limitless funds to push around. The idea is to whack the FX pair one way or the other real hard, real fast, light off everyone's momentum-sniffing computer trading algos and then it's self-fulfilling after that.
Can someone explain this? This USD/JPY ramp is literally everyday on ZH and I don't fully understand it. Is it basically US firms borrowing yen interest free from Japan?
replace the generic word "firms" for the rather more specific one "banks", and you've pretty much got it by yourself. carry + leverage = US equities up. Don't bother shorting US equities until bond mkts reprice/rates actually go up. I tried for the first time in 5 years last week.....and have quickly realised why I havn't shorted in a long time.
Borrow yen at low interest rate - convert yen to dollars - use dollars to invest in things that pay a higher rate of return than you are paying to borrow the yen.
What makes it even better is the belief that in the future the yen will be much weaker VS where it is today -
So you borrow 1 billion yen convert it into $9.4 million dollars 106 yen to the dollar.
But when you pay it back - the yen has weakened VS the dollar - say the exchange rate is 120 yen to the dollar - so it only takes $8.3 million dollars to buy 1 billion yen.
So you earn the spread on investment rate from borrowing at a lower rate in yen than you can invest at with dollars
and
You gain when you repay the loan because it takes fewer dollars.
There may be more to it than this - but this is the basics.
Japan and the Yen will implode soon enough. Will get the see the future of the US, only a bigger pop.
When Japan goes, the world will go including the US.
And Pms are dropping....of course....
one side trade is not a "market"
what a fucking farce this is yet again, Nikkei bounces 120 points , dow 150, dax Russell 12 S&P 10 and Gold and Silver fucking hammered back down
USD/JPY will hit 120 soon.
Look at the DAX. It's gained back almost 1/2 it's intraday loses. This ponzi market is a joke! FX is so detached from reality right now.
Let's keep it green shall we, what's the point of BTFD if there's no green? Green is healthy, green is good.
A farce, anyone still in this rigged casino is asking to get their balls cutoff. Heads the bankers win, tails you lose.
Get out and keep stacking for fuck sakes, they can rig the markets but they just can't stop time and the inevitable.
Two choices, innovate or intubate.
"Anyone seen Toto"?
taraxias, I hate to pop your bubble, but there is NOBODY outside of this rigged casino. We are all in, one way or another.
And please pay attention to this, even ZEROHEDGE is up to their eyeballs inside the casino.
So I am willing to bet China is borrowing yen to short paper gold and buy physical gold. What other country could afford the gold short exposure?
I agree that may well have been happening, a few pundits who have written about this suggesting they are very likely if this is the case to actually reverse this and take the paper market out and take delivery... anyway who knows,... however with the shit hitting the fan in China I would expect to see a price rise in Yuan as there is a rush to get more physical, an amount that could be considerable if things get bad quickly, more than enough to empty the warehouses and bullion banks within days or weeks perhaps...the timiing of this is obviously key do we see $1180 first or did it even start this morning
First time in a long time where I have seen fight back.
Today gold is irrelevant. It matters only to citizens who see into the future. Even the ECB which holds 10,800 tond of gold on their balance sheet does not need gold. It is just there waiting for the future.
Today it is just a toy and a dangerous one to those who need the world to see paper as beng trustworthy.
...and yes China has people who see into the future, understand to real function of gold and are accumulating it.
btw central banks don't 'need' gold', they need a way to control their paper in emergencies. Central banks are not like people, they don't exist to accumulate wealth. They are there to control and manage currencies.
Wow HOD up 75 points ! just as the markets creep lower, must smash Gold and Silver back down