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Strategies & Market Trends : The coming US dollar crisis -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (711)	8/9/2007 3:41:02 PM
From: RockyBalboa	Respond to of 71455

Yes, someone was purchasing Yen for a while since it hit the 81.50ish bottom. Today's Yen rise looks really solid with no people investing into the carry trade. Unlike earlier the Yen did not sell off in the late session. It begins to look like a reversal after the three-day jolt.

To: Real Man who wrote (711)	8/9/2007 10:42:42 PM
From: Paul Kern	Respond to of 71455

Yen Rises, Extending Biggest Gain Since 2001, on Credit Losses By David McIntyre and Kosuke Goto Aug. 10 (Bloomberg) -- The yen rose against the euro, after the biggest advance in six years yesterday, as widening credit market losses prompted investors to trim holdings of riskier assets funded by loans in Japan. The yen has advanced against 16 of the world's most-active currencies this week as investors cut so-called carry trades. Japan's currency rose the most against high-yielding currencies including the Brazilian Real and the New Zealand dollar after BNP Paribas SA, France's biggest bank, yesterday froze three investment funds that owned subprime loans, causing U.S. and European stocks to tumble. ``We're not through this problem,'' said Greg Gibbs, a currency strategist at ABN Amro Holding NV in Sydney. ``The first port of call is to close down risk and those positions are in high-yielding carry trade currencies.'' The yen rose to 161.11 per euro at 10:54 a.m. in Tokyo from 161.63 yesterday, when it climbed 2.2 percent, the most since May 2001. Japan's currency advanced to 117.93 per dollar from 118.16. The yen may fall to 117 per dollar today, Gibbs said. Nine of the 10 most-active Asian currencies weakened as investors reduced holdings of emerging market assets. The overnight rates banks charge each other to lend in dollars soared to the highest in six years yesterday within hours of the biggest French bank halting withdrawals from funds linked to U.S. subprime mortgages. Japan's Nikkei 225 Stock Average fell as much as 2.7 percent today after the Standard and Poor's 500 Index slumped 3 percent yesterday. National benchmarks tumbled in all 18 western European markets. `Shook Up' Gains in the yen may be limited by speculation the Bank of Japan is less likely to raise interest rates this month. ``The markets are all shook up,'' said Tomoko Fujii, senior economist and strategist in Tokyo at Bank of America N.A. ``A rapid increase in short-term overnight rates is equivalent of a rate hike by the Bank of Japan. Should stock prices continue to plunge on a daily basis, it should be hard for the BOJ to raise rates this month.'' Bank of America N.A. predicts the yen will fall to 120 per dollar by year-end. The chance of the BOJ raising borrowing costs at this month's meeting fell to 38 percent from 65 percent yesterday, according to calculations by Credit Suisse Group using overnight index swaps. The central bank's two-day meeting ends on Aug. 23. Japanese government bonds rose on concern losses on debt tied to subprime mortgages will widen, adding to pressure on the central bank to delay raising rates. Adds Liquidity The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130 billion) yesterday to assuage a credit crunch. The Federal Reserve added $24 billion yesterday in temporary funds to the banking system, the most since April. The Bank of Japan added 1 trillion yen ($8.49 billion) to the financial system, the largest same-day operation since June 29. Japan's overnight call loan rates traded at about 0.52 percent after the operation, down from 0.545 percent earlier in the day, according to Tokyo Tanshi Co. Retail Investors Gains in the yen may also be limited as Japanese investors took advantage of a 1.3 percent rally against the dollar yesterday to sell the currency to invest in higher-yielding securities. Japan's yen declined 6.7 percent against the Australian dollar and 5.7 percent versus the New Zealand dollar this year, as the lowest interest rate among major economies encouraged carry trades. ``Japanese retail investors and importers are selling the yen, capitalizing on its rally,'' said Kenichiro Fujita, manager of Aozora Bank Ltd.'s derivatives marketing group in Tokyo. ``They are buying foreign currencies on the dips, capping any gains in the yen.'' The Japanese currency may fall to 118.80 per dollar and 162.50 a euro today, Fujita said. Japan's benchmark borrowing costs of 0.5 percent are the lowest among major economies and compare with 5.25 percent in the U.S., 4 percent in the euro region, 6.5 percent in Australia, 8.25 percent in New Zealand and 5.75 percent in the U.K. The carry trade has weakened the yen by 18 percent against the New Zealand dollar over the past 12 months, 13 percent versus the Brazilian real, 12 percent against the Australian dollar and 8.8 percent against the pound. To contact the reporter on this story: David McIntyre in Sydney at dmcintyre2@bloomberg.net ; Kosuke Goto in Tokyo at kgoto2@bloomberg.net ; Last Updated: August 9, 2007 22:15 EDT