Some interesting commentary on the cause of the market melt down.
.It seems there is more to the market crashing than fear of a recession.
Be interesting to hear if the RBA goes from "hold" to "lower".
Yen trade still to play out.
"180,000 contracts betting on a weaker yen on a net basis, worth more than $US14bn,"
A lot like betting on HGO's share price falling. It won't go on for ever.
One day soon shorters will be rushing to close out their short positions.
Investors are rushing to close out one of the most popular investment strategies of recent years: making investments with borrowed Japanese yen.
Many investors have been participating in the so-called carry trade.
Here’s how it works: an investor borrows the currency of a place where interest rates are low, like Japan or China, and uses it to invest in a currency where interest rates are higher, like Mexico.The trade depends on the borrowing currency remaining cheap, and market volatility remaining low. Both of those factors have turned against investors in recent weeks as the yen surged, forcing them to close out out their positions.
Hedge funds and other speculative investors were holding more than 180,000 contracts betting on a weaker yen on a net basis, worth more than $US14bn, at the start of July, according to CFTC data. By last week, those positions had been cut to around $6bn.
But this is just a small corner of the market for borrowing in yen, notes Chris Turner, global head of markets at ING.In recent years, banks, asset managers and others have also aggressively borrowed in the Japanese currency. They were encouraged by Japan's negative interest rate policy, which it only ended in April, years after Western central banks began aggressively raising rates to combat inflation.
The Wall Street Journal
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