Quote:
Originally Posted by whipper
These are very good questions and answers. Ive been searching also to find fundemental reasons for shorting the USD agaists the yen and come up short! No pun intended.  Best I can figure is with differentials narrowing between the pair this would couse a reversal of the previouse trend that lasted some years I might add! Maybe John K knows this one but as the dollar gained streangth against the yen the interest rates for the dollar was higher. When the usd/jpy was at 80 in the past what was the differential? ... |
USDJPY bottomed out around 80 back in the summer of 1995. Back then the Fed Funds rate was around 5.75 percent and the Japanese target rate was around 1.00 percent; so there wasn't a tight yield differential. It had more to do with the rebound in investment in Japan following the popping of the asset bubble in 1990 and the seemingly sound returns the economy was notching up despite the trouble brewing in other countries. By the time the government admitted many of its banks were insolvent the Asian financial crisis began to unwind and the USDJPY reversal was sharp.
