Monday October 27
 
17:00
 
Why The Yen Is Strong

From the BBC:

Earlier on Monday the Group of Seven (G7) industrialised nations issued a statement warning that the strength of the yen was a threat to economic stability, which was taken as a threat of co-ordinated action to reduce the value of the currency.

While the yen briefly weakened, it soon climbed back towards Friday’s 13-year high against the dollar.

The yen has been strengthening as a result of the end of the carry trade, in which traders borrowed the Japanese currency and used it to buy currencies with higher interest rates.

As the difference between Japanese rates and those elsewhere in the world has fallen, traders have been unwinding the carry trade, which means they have been using other currencies to buy yen, which has boosted the Japanese currency.

This makes sense. Interest rates in Japan are almost 0%. I always send my money back to the UK to take advantage of better interest rates. The difference between me and Japanese, however, is that I am in no hurry to transfer it back since money in the UK is useful to me. The Japanese seem to be transferring it back even though the rate is terrible.

One of the few exchanges rising was the Seoul market, which reversed early losses to close up 0.8% after South Korea’s central bank cut its key interest rate from 5% to 4.25% at a rare, unscheduled meeting.

There are some real amazing bargains to be had at the moment with the difference between the Yen and GBP, Korean Won. A Nikon D700, for example, at 40%+ cheaper in Korea than Japan - it is usually 40% more expensive.