Yen-vs-Dollar

[hortysir]

I'm always the first to admit that I stink at Economics, so I pose this question to those more learned than I:


We all are painfully aware of the trouble our Dollar is in.

Though I haven't heard much comparison in recent years, I do recall much ado about the Japanese Yen against our Dollar.


Given this recent tragedy in Japan, will it hurt or help our Dollar?

 

[konkon]

The US dollar is going to head downwards in the long run and it will only head up if the Fed lifts rates. If some had their way it would go down a further 20% from here in the long run.

 

[hortysir]

It's going to do that all on it's own, with how our Fed is treating it.

I was curious as to what impact any fluctuation in the value of the Yen would have.
Will it speed, slow, stop, or reverse the dive of the Dollar?

 

[boedicca]

I've been wondering about this. Things to consider:

- After the Kobe quake, Japan repatriated cash in order to rebuild, and the dollar devalued against the yen from 100 to 80 yen:dollar.

- Both countries have massive levels of debt relative to GDP. The Fed keeps increasing the money supply in an ultimately futile attempt to keep interest rates low and stimulate the economy. The Japanese debt is 200% of GDP; they will likely increase their money supply to address rebuilding.

I'm still chewing on where it will go (I need to hedge some yen based business) - but am inclined to think the yen will deteriorate for awhile.

Of course, if currency forecasting were my strong suit, I'd be an Evul Billionaire Currency Trader.

 

[hortysir]

I've been wondering about this. Things to consider:

- After the Kobe quake, Japan repatriated cash in order to rebuild, and the dollar devalued against the yen from 100 to 80 yen:dollar.

- Both countries have massive levels of debt relative to GDP. The Fed keeps increasing the money supply in an ultimately futile attempt to keep interest rates low and stimulate the economy. The Japanese debt is 200% of GDP; they will likely increase their money supply to address rebuilding.

I'm still chewing on where it will go (I need to hedge some yen based business) - but am inclined to think the yen will deteriorate for awhile.

Of course, if currency forecasting were my strong suit, I'd be an Evul Billionaire Currency Trader.

So if/when the Yen does deteriorate, as you called it, will that boost our Dollar?

And 200%?!


Really?

And, from what I saw scrolling across my screen yesterday, we're afraid of ours climbing to 89% by 2021???


I guess, in relative terms, that's alot.
It took Japan (how many?) thousands of years to get there.
We managed to get halfway in under 300

 

[boedicca]

Yes, if the yen deteriorates, it devalues against the dollar, and the dollar is relatively stronger. Of course, both currencies may also deteriorate against other ones.

Our debt is already 100% of GDP, bub.

U.S. National Debt Clock : Real Time

 

[hortysir]

Yes, if the yen deteriorates, it devalues against the dollar, and the dollar is relatively stronger. Of course, both currencies may also deteriorate against other ones.

Our debt is already 100% of GDP, bub.

U.S. National Debt Clock : Real Time

Okay, "gal"

Thanks for that clarification.
(told ya I suck at econ)

Not sure what it was I read, then....

 

[Norman]

I'm always the first to admit that I stink at Economics, so I pose this question to those more learned than I:


We all are painfully aware of the trouble our Dollar is in.

Though I haven't heard much comparison in recent years, I do recall much ado about the Japanese Yen against our Dollar.


Given this recent tragedy in Japan, will it hurt or help our Dollar?

ONLY, in the sense that it might hurt yen as the bank of japan is printing loads of money thus decreasing the interest earned in japan(without this it would be other way around). Making people perhaps prefer the dollar.

The bad thing is, japan is invested quite heavily in US bonds, and they may be selling them in order to spend themselves. This is negative for dollar, as it means the debt has to be perhaps printed or taxed (then again, at some point we are expecting that anyway - but short term speaking). For export sector it would be positive in USA... BUT, I doubt that is what is going to happen as the global economy is so F** up.

Then again, it seems like japan is foolishly not selling their bonds. Which is very bad choice IMO. They have very good growth expectation in their country as the tsunami just wiped a lot of stuff out, and they already know how to rebuild it, while in USA it doesn't look quite as good.

 

[Norman]

The US dollar is going to head downwards in the long run and it will only head up if the Fed lifts rates. If some had their way it would go down a further 20% from here in the long run.

If FED lifts rates, US is screwed as the government can't service the promised services. Which means a lot of angry people electing an angry leader

So at this point as far as I am concerned, the dollar is trash in any case. Even for short term speculation euro is much better choice, though I would not necessarily try to speculate if Lusitania or Titanic sinks faster. Though just maybe you could make a quick buck now as I think the ECB may really lift rates at least temporarily.

Fed on the other hand... I doubt they will fool anyone.

 

[william the wie]

I've been wondering about this. Things to consider:

- After the Kobe quake, Japan repatriated cash in order to rebuild, and the dollar devalued against the yen from 100 to 80 yen:dollar.

- Both countries have massive levels of debt relative to GDP. The Fed keeps increasing the money supply in an ultimately futile attempt to keep interest rates low and stimulate the economy. The Japanese debt is 200% of GDP; they will likely increase their money supply to address rebuilding.

I'm still chewing on where it will go (I need to hedge some yen based business) - but am inclined to think the yen will deteriorate for awhile.

Of course, if currency forecasting were my strong suit, I'd be an Evul Billionaire Currency Trader.

So if/when the Yen does deteriorate, as you called it, will that boost our Dollar?

And 200%?!


Really?

And, from what I saw scrolling across my screen yesterday, we're afraid of ours climbing to 89% by 2021???


I guess, in relative terms, that's alot.
It took Japan (how many?) thousands of years to get there.
We managed to get halfway in under 300

The Yen is only about 150 years old. The current US dollar a bit over 220 years. In 1931 the exchange rate Y1.92 = $1. Japanese debt is almost all post-WWII debt.

 

[Norman]

Difference between US and japan is 2 fold.

1) Japan has a lot of assets, like 1 trillion in US bonds (I think it's this much), maybe even some dollars. US has not really that many sellable assets, that do not affect the country.

2) Japan's debt is mostly domestic, so all the paid dollars go back to the economy and thus also make some tax revenue / grow it. US debt is foreign, which means it grew the economy when it was taken and does not do so at all when paying back.

Well, that's all I can think off. BTW japan already printed a bunch of yen. I read 17 trillion yen (200 bn USD). But I have also read 60 trillion in one site but that may not be accurate. Anyway 200bn dollars for country size of japan sounds like a lot more than say... QE2.

Uh yeah, and also US has huge trade deficit and not much investments to reflect that (IE it's all consumer goods and govt programs etc.). Meaning tough time for the economy.

 

[editec]

I'm always the first to admit that I stink at Economics, so I pose this question to those more learned than I:


We all are painfully aware of the trouble our Dollar is in.

Though I haven't heard much comparison in recent years, I do recall much ado about the Japanese Yen against our Dollar.


Given this recent tragedy in Japan, will it hurt or help our Dollar?

I think its going to hurt our dollar and our economy (in the short run at least) in at least two ways.

1. Japan might sell its US debt, thus driving up the cost of borrowing for the government.

2. Japan's US industrial base needs to resupplied so that our workers can assemble finished products. As that "just in time" supply system means very small inventories, a lot of people working for Toyota USA and so forth are going to be laid off or their hours cut back, I suspect.

 

[hortysir]

Does that mean that, maybe, we can export to them for a while for a change???????

 

[william the wie]

Does that mean that, maybe, we can export to them for a while for a change???????

For a while yes.

 

[boedicca]

The Fed is supporting the yen to make sure their Goldman Sachs cronyism don't get creamed in currency options:

First, joining the central banking cartels’ market rigging operation in support of the yen, the Fed helped bail-out carry traders from a savage short-covering squeeze. Then, green lighting the big banks for another go-round of the dividend and share-buyback scam, it handsomely rewarded options traders who had been front-running this announcement for weeks.

Indeed, this sort of action is so blatant that the Fed might as well just look for a financial vein in the vicinity of 200 West St. [Goldman Sachs (GS) headquarters], and proceed straight-away to mainline the trading desks located there. In fact, such an action would amount to a POMO [Permanent Open Market Operations] -- so it is already doing just that!

In any event, the yen intervention certainly had nothing to do with the evident distress of the Japanese people. What happened is that one of the potent engines of the global carry-trade -- the massive use of the yen as a zero cost funding currency -- backfired violently in response to the unexpected disasters in Japan.

Accordingly, this should have been a moment of condign punishment -- wiping out years of speculative gains in heavily leveraged commodity and Emerging Markets currency and equity wagers, and putting two-way risk back into the markets for so-called risk assets. Instead, once again, speculators were assured that in the global financial casino operated by the world’s central bankers, the house always has their back---this time with an exchange rate cap on what would otherwise have been a catastrophic surge in their yen funding costs. ...

Large Banks Pose Threat To American Economy | Markets | Minyanville.com


How's that Hopey-Changey thing workin' out for you?

 

[hortysir]

this should have been a moment of condign punishment -- wiping out years of speculative gains in heavily leveraged commodity and Emerging Markets currency and equity wagers, and putting two-way risk back into the markets for so-called risk assets. Instead, once again, speculators were assured that in the global financial casino operated by the world’s central bankers, the house always has their back

That's some phukt up shit.....

 

[American Horse]

I'm always the first to admit that I stink at Economics, so I pose this question to those more learned than I:


We all are painfully aware of the trouble our Dollar is in.

Though I haven't heard much comparison in recent years, I do recall much ado about the Japanese Yen against our Dollar.


Given this recent tragedy in Japan, will it hurt or help our Dollar?

" Japan has more than its share of troubles: an aging population, 20 years of slow economic growth, and an unstable government as reactionaries in the Diet resist meaningful free-market reform.
Now comes the great tragedy of the earthquake and tsunami. One major post-disaster danger is that the Japanese authorities will mishandle the recovery, with unfortunate consequences for the global economy.

The first test for the government came early on, and its response raises questions. After the disaster last week, the value of the Japanese yen actually rose against the U.S. dollar. While that might seem counterintuitive, currency traders offered a plausible explanation.

They were betting that the demand for yen would go up as Japanese companies and the government were forced to convert some of their vast dollar holdings into yen to finance reconstruction. With the dollar already weak internationally, it didn't take much to tip the balance toward a stronger yen.

Unsurprisingly, this raised alarms at the Bank of Japan (BOJ). A stronger yen, already attracting international capital seeking a haven safer than the dollar, might weaken the competitiveness of Japanese exporters at a most inopportune time. The earthquake had sent the Nikkei stock index tumbling. So the BOJ embarked on a massive effusion of yen, pouring a record 15 trillion yen ($183 billion) into the market. BOJ Governor Masaaki Shirakawa promised "massive" liquidity to combat yen appreciation. The bank's action stabilized the yen-dollar exchange rate through Monday. "

George Melloan: Japan and the Broken Window Fallacy - WSJ.com March 15

 

[hortysir]

They were betting that the demand for yen would go up as Japanese companies and the government were forced to convert some of their vast dollar holdings into yen to finance reconstruction.

In other words, speculators.....

 

[william the wie]

They were betting that the demand for yen would go up as Japanese companies and the government were forced to convert some of their vast dollar holdings into yen to finance reconstruction.

In other words, speculators.....

With today's accounting rules and tax laws speculation is pretty much required. Very long story but currency fluctuations can get you taxed on non-existent income or cause phantom dips in earnings. Thank the IRS and FASB for this mess.

 

[boedicca]

this should have been a moment of condign punishment -- wiping out years of speculative gains in heavily leveraged commodity and Emerging Markets currency and equity wagers, and putting two-way risk back into the markets for so-called risk assets. Instead, once again, speculators were assured that in the global financial casino operated by the world’s central bankers, the house always has their back

That's some phukt up shit.....

It's a good example, among many, of why we should get rid of the Fed.