Displaying items by tag: currency

The ongoing unwinding of yen carry trades could lead to more turbulence in the markets this month, warns Kathy Lien of BK Asset Management. As U.S. yields drop and the dollar weakens, the yen is expected to gain strength, potentially triggering sell-offs similar to those seen in August. 

The practice of carry trading, where investors borrow in low-yielding currencies like the yen to invest in higher-return assets, is facing disruption due to Japan’s recent interest rate increases. Lien suggests that if stock markets experience significant downturns, the yen's value could continue to rise, reversing its longstanding undervaluation. 

This shift may impact asset prices globally in the coming years, with additional volatility likely as the U.S. economy faces growing pressures. September, often volatile for stocks, could see more dramatic market moves.

Finsum: This is one of the most important currency stories to watch in the coming weeks as rate cuts look to be very aggressive. 

(Beijing)

The US and China are currently in a hot-under-the-collar spat over trade. Each side is proposing to raise tariffs in response to the other, and there is no end in sight. Well, China may be changing gears and adding a new weapon—Yuan devaluation. Beijing is reportedly exploring how to use devaluation as a tool in a trade war. Weakening the Yuan would make Chinese goods cheaper to buy overseas and could be a tool to boost exports. At the same time, it makes it harder for Chinese companies to buy overseas goods.

FINSUM: While on paper it sounds promising, intentionally weakening the currency would give weight to claims (most loudly by Trump) that China is a currency manipulator, which could turn favor against Beijing.