Why You Should NOT Play the Japanese Yen..at Least Not Now..
Dear Trader,
There is good reason why you should NOT Play the Japanese Yen under the current market conditions....Volatility, and LOTS of it.
Volatility basically translates into risk, and LOTS of volatility means LOTS of risk, and unless you can stomach all that risk you should stay out of Japanese Yen positions, regardless of how confident you are.
You see, the Japanese Yen Carry Trade is fueled by the interest rate differential between the Yen and the other higher-yielding currencies. This is the main reason why people short the yen and go long other currencies; to capture the positive yield spread by holding the higher yielding currency and borrowing the lower-yielding currency.
Then, why doesn't everyone just do this? Simple....risk aversion.
When people feel that the market conditions are ripe for bearing risk, they will dump all their money into riskier, higher-yielding assets, such as US Dollar assets or New Zealand Dollar assets. But when there is trouble in the US Housing Market and credit market and some hedge fund suddenly has to liquidate all its assets, then people panic and start liquidating their risky assets and putting the money into lower-yielding, but safer assets (such as assets denominated in the Japanese Yen and the Swiss Franc). As a result, Carry Trades will be liquidated in mass quantities and will cause a ripple in the Currency Market.
In summary, at this time the market conditions are not really ripe for going either way, so it would be best to just stay out of playing the Japanese Yen for the time being and wait until the market conditions show a clearer direction of which way the Yen is going to go.
If you want to learn about a stress-free way of profiting from the Forex Market, without bearing all that risk and losing sleep at night, you would want to check this website out:
http://www.stressfreeforex.com
Stay tuned for more insights on the Forex Market!
To successful trading,
DC
There is good reason why you should NOT Play the Japanese Yen under the current market conditions....Volatility, and LOTS of it.
Volatility basically translates into risk, and LOTS of volatility means LOTS of risk, and unless you can stomach all that risk you should stay out of Japanese Yen positions, regardless of how confident you are.
You see, the Japanese Yen Carry Trade is fueled by the interest rate differential between the Yen and the other higher-yielding currencies. This is the main reason why people short the yen and go long other currencies; to capture the positive yield spread by holding the higher yielding currency and borrowing the lower-yielding currency.
Then, why doesn't everyone just do this? Simple....risk aversion.
When people feel that the market conditions are ripe for bearing risk, they will dump all their money into riskier, higher-yielding assets, such as US Dollar assets or New Zealand Dollar assets. But when there is trouble in the US Housing Market and credit market and some hedge fund suddenly has to liquidate all its assets, then people panic and start liquidating their risky assets and putting the money into lower-yielding, but safer assets (such as assets denominated in the Japanese Yen and the Swiss Franc). As a result, Carry Trades will be liquidated in mass quantities and will cause a ripple in the Currency Market.
In summary, at this time the market conditions are not really ripe for going either way, so it would be best to just stay out of playing the Japanese Yen for the time being and wait until the market conditions show a clearer direction of which way the Yen is going to go.
If you want to learn about a stress-free way of profiting from the Forex Market, without bearing all that risk and losing sleep at night, you would want to check this website out:
http://www.stressfreeforex.com
Stay tuned for more insights on the Forex Market!
To successful trading,
DC
posted by ForexDragon at 6:00 PM
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