近日日圓風波

為什麼日圓勁升？ 日圓升怎影響股市和基金？


The article below was provided by ...Anonymous....

See this post for other explainations.

Theory behind "the Jap dollar" on stock market

Written by ...Anonymous..., 16 Mar 07

Japan has one of the largest foreign reserve in the world. What that means is that the Japanese has accumulated a lot of foreign currencies (or money so to speak) through trade in the 70's and 80's. When their economy collapsed in the early 90's (for reasons that are similar to HK in 97), no one is willing to borrow money to invest anymore. To simulate economy growth, the Jap central bank has lowered its interest rate to 0% within a few years. So it will cost absolutely nothing to borrow Yen. "Free" money so to speak.

So you are a foreign investors, looking for investments, what would you do? Jap's rate = 0%, US current interest rate is 5%, Aust ~ 6%, NZ 7%. The easiest thing you can do is to borrow Yen at no cost, convert into US/AUS/NZ and put a fix deposit in the bank for a year, earn the interest rate, and convert back to Yen again. You would have earn the >= 5% of interest. (This practice is referred to as Carry Trade)

You may wonder that the exchange rate would have changed so much in a year that the earnings on interest would have gone. Well, this might be true for other countries, but Jap central bank has a notorious reputation to stop the Yen devalued too much to protect the interest of the businesses who rely on exports for profits. So the exchange rate is guaranteed to be pretty stable in the foreseeable future.

Now of course, one don't have to be as conserved as I've mentioned and use the money for fixed deposit. Many of these "free" money would have used in many other ways. Shares, bonds, derivatives, equity...you name it.

So when the Jap central bank rised the interest rate from 0 to 0.5% within a short period of time, the general investment communities was panic since the cost of borrow the "free" money goes up. If your investments is not earning the 0.5% interest rate, than you better return the Yen. And simulatenously a lot of other people is returning the Yen, which pushed the Yen's rate higher (exchange rate). The higher rate would means that the cost of the Yen would be higher, compared to the time when you borrowed it for investment. So more people would return the Yen, and the vicious cycle goes on.

Of course, there are FXXKING millions of reasons why the stock market crashed. And people just love to explain these things.

Written by ...Anonymous..., 16 Mar 07