China's overnight destruction of $80 billion of eligible collateral [5] from the great global carry trade has had destructive consequences on the massively crowded short JPY (long USDJPY) trade. Haviung already lost ground following the dismal downward revisions in GDP, USDJPY is down 350 pips from yesterday morning's highs (This is the biggest 2-day drop in USDJPY in 18 months.) and the Nikkei 225 is down over 700 points in the same period... Abe approval ratings are plunging-er.
USDJPY -350 pips below 118.50 - the biggest 2-day drop in 18 months (since GDP was revised lower)
[6]
as Nikkei collapses from over 18,200 to 17,500 in 2 days...
[7]
As the great BoJ/Fed handover begins to fade...
[8]
The Nikkei is +12% YTD now (in JPY) and USDJPY is up 12.5% - leaving USD-based NKY investors underwater still.
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Did the downward revision to Japanese GDP straw finally break the back of the Central Bank Omnipotence camel?
Charts: Bloomberg
