Monday, January 25, 2016

Yen is going higher because of selling of long equity positions

Simply put, the equity markets in Asia have come apart at their very seams, and as they plunge the funding currencies, primarily the yen, are being repurchased as these equity positions are closed out. This is not a run to quality that is driving the yen higher, and it is not the result of better economic data out of Japan either.

This is simply the massive, and sometimes seemingly forced, unwinding of long positions in the world’s equity markets by hedge funds and other institutional investors. It will stop when it stops and there is nothing more that one can say that shall be of greater merit, nor wiser.