Comments on: Reboot of yen carry trade looks tempting but risky Mon, 26 Sep 2016 03:26:00 +0000 hourly 1 By: Economist234 Sat, 19 Mar 2011 02:12:58 +0000 I absolutely agree that the yen will gain in value as fundamentals always rule the long term picture. The Japanese economy has been under performing for years. However, past obsession with the carry-trade is not accurate. Any markets paying high interest have gained against the Yen, Dollar and Euro. The Euro/Yen gains in the past were mainly due to strength of the euro fueled by high priced oil and the increasing trend of trading oil for euro’s (not dollars). The US dollar has been falling against the yen for 20 years mainly due to central bank policies. It never made sense for US, Euro, Aussie etc based funds to ever do the carry trade. Even when US and Euro rates were lowered the risk of 10% annual fluctuation of currency exchange discourages the carry trade. Would you risk making 4%-5% for potential loses of 10%. The yen has been getting stronger simply due to Japan. They are the best savers in the world with much foreign investment. But for years now the Japanese economy has not been healthy causing repatriation of funds. Combined with the fact that they were not a part of the derivative crises. That has all played out now. This current crisis will be the last major push of repatriation of Japanese funds. The fundamentals will take over. The very recent spike in funds buying (CFTC Commitments report), illustrates the increasing trend of funds trading the technicals not the fundamentals. Mr. Dolan from has this down and the funds trade exactly like forex strategists. Day to day. This will change and I guarantee it. The markets are becoming increasingly disconnected and the future trend of long term investing based on fundamentals will take over.