USDJPY & The Earthquake
When I went to bed last night I happened to have been long USDJPY from 82.90. If someone would have asked me then what I thought would have been the effect on the yen if a 8.9 earthquake hit Japan while I slept, I would have said USDJPY would have been up 3 or 4% easy. I would have been wrong. As it was I’m lucky I had a stop in place at 82.69.
Obviously the Japanese Ministry of Finance has a strong contingency plan in place for protecting their markets following catastrophes, and supporting the Yen is a part of it. It is actually a sound plan because by back-stopping the currency they take the pressure off both local and non-Japanese holders of yen denominated securities, investments and assets, who decide to hold the line on selling when they see stable prices. This is how modern market’s work.
Today’s price action is also a reminder of why they call short yen, or long USDJPY the widow maker; because no matter where you sold yen over the last 15 years, you are under water.
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Jay Norris is the Chief Market Strategist at www.Clovernest.com, and author of Mastering the Currency Market, McGraw-Hill, 2009.
DISCLAIMER: Forex (off-exchange foreign currency futures and options or FX) trading involves substantial risk of loss and is not suitable for every investor!
