(This is an excerpt from an article I originally published on Seeking Alpha on February 24, 2012. Click here to read the entire piece.)
Ever since I heard hedge fund manager Kyle Bass lay out a convincing case in August, 2010 for a massive sell-off in the Japanese yen, I have had a hard time believing in the lasting strength of the Japanese yen. {snip}
Now, without direct intervention, the yen has been weakening at an unusually fast pace against all major currencies. Even against the dollar, the yen has finally hurdled the highs from the last intervention when I concluded that “this time is different.” {snip}
Source: FreeStockCharts.com
It is still too early to conclude that the currency markets are catching on to the relative disadvantages of the yen, but it sure seems like the case can be made. In the Financial Times on February 23, Jim O’Neill speculated that the end of the Greek bond crisis will send the market searching for another victim with an extremely high debt-to-GDP ratio; at 230%, Japan appears like a potential next stop (see “Is Japan’s ‘happy depression’ about to turn unhappy?“). {snip}
For now, I have closed out my yen shorts in anticipation of some kind of reactionary rebound in the yen. For example, some macro-economic or geopolitical headline that sends traders back into old habits rushing for the “safety” of the yen. Also note that the current move has been extremely sharp and such moves in currencies typically only last in short bursts. {snip}
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on February 24, 2012. Click here to read the entire piece.)
Full disclosure: no positions