Japanese Yen Consolidates As Financial Markets Remain Jittery

The Japanese yen slipped against most of the majors, especially versus the Canadian dollar, Australian dollar, and US dollar.

Indeed, in the aftermath of the US government’s seizure of Fannie Mae and Freddie Mac, risky assets have been quite volatile. For example, the DJIA rallied nearly 150 points mid-day on Wednesday, only to end the day up a tepid 38 points at 11,268.92. The moves suggest that the latest intervention efforts by the US will do little to stop the bear market in equities and sooth the global credit crunch. Furthermore, we continue to see that Japanese fundamentals have little bearing on the currency, as the latest forex correlations report shows that carry trades and the DJIA have increasingly been moving in lockstep (though the correlation is not as high as it was in 2007). Going forward, the Japanese yen will continue to depend on the status of risk appetite in the market, and while the currency could pull-back in the near-term, I still think there is long-term bullish potential for the low-yielder. [B]As a result, I will look for JPY buying opportunities on sharp declines.

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