Yen is too strong

At 10:49PM EST, USD/JPY is trading at 96.19 and EUR/JPY at 123.16. Some say the strengthen Yen is due to carry trade unwind. Companies who borrowed yen to fund their business expansion now have to pay it back due to global economy slowing down. As yen appreciates, the cost of paying back borrowed yen goes up and slow down their payback schedule. I have no idea how much money is flowing back to yen and keep its demand high, but I do know this: when USD/JPY trade below 100, pressure mounts for for JCB to intervene. The JCB is more reluctant to intervene than it used to because of China. You can’t tell China to loosen its grip on the RMB while you actively manipulate your own currency.

I’m going to buy some USD/JPY at this level. I think carry trade unwind is overrated. Japan being an export driven economy must rely on strong export to pull them out of or keep them from falling into recession. Yen too strong is going to hurt Japan.

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