JPY: Japanese Yen reverted to growth

Forex analytics: The Japanese Yen rate is strengthening again reverted to growth at the Forex currency market on Friday. However the situation at the global capital markets remains volatile this morning which prevents from making far-reaching conclusions. 
Forex forecast: MACD indicator for the pair USD/JPY crossed the signal line from top to bottom, giving a pair sell signal. Stochastic oscillator started to ...

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JPY: Japanese Yen stuck in the range

Forex analytics: At the Forex currency market the Japanese Yen rate remains in the quite narrow range of 80.15-81.33 at the beginning of the week. At the moments the interest of players in JPY has been observed, since it acts as a safe asset while external background is still tense.
Forex forecast: MACD indicator for the pair USD/JPY has crossed the signal line from top to bottom and is not giving a clear signal. ...

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JPY: Japanese Yen is getting close to highs of March

Forex analytics: At the Forex currency market the Japanese Yen rate continues to grow on Tuesday, since the JPY acts as a safe harbor amid uncertainty in the market. 
Forex forecast: MACD indicator has crossed the signal line from top to bottom, giving a pair sell signal. Stochastic Oscillator has come back into oversold zone and gives a similar signal.
Forex recommendations: in case of breakdown at the level of ...

JPY: Japanese Yen is still of interest as “safe harbor”

Forex analytics: The Japanese Yen rate continues to grow at the Forex currency market on Wednesday morning: the Yen is of interest to investors as safe currency amid instability at the world financial trading floors.
Forex forecast: MACD indicator for the pair USD/JPY has crossed the signal line from top to bottom, giving a pair sell signal. Stochastic Oscillator has come back into oversold zone, giving a similar ...

JPY: Japanese Yen is getting stronger day by day

Forex analytics: The Japanese Yen rate continues to gain strength at the Forex currency market on Thursday because investors are shifting from risky positions to the safer assets. Although markets in the Country of the Rising Sun will only open tomorrow after the “Gold Week”, the Bank of Japan keeps watch on the situation and is prepared to respond.
Forex forecast: MACD indicator for the pair USD/JPY crossed ...

Japanese Black Swan Causes a Nuclear Meltdown

Today the world`s focus is still on Japan and the country`s multitude of crises. The Japanese stock market was down by more than 6% today, but the rest of the world was mostly calm, perhaps on the expectation that the aftermath of the catastrophe will not be that bad for the Japanese economy as the government returns to its old habit, this time unavoidably, of splashing cash around in order to deal with the consequences.

In Libya, conflicting reports speak about the Colonel`s forces being forced once again out of the eastern regions where they were thought to have defeated the rebel forces. U.N. Security Council and NATO are still unsure about if and how they should intervene in the crisis, which is supporting oil prices so far. 

As the world watches Japan, anxious to see an end to the events that ensued Friday`s terrifying earthquake and tsunami, the possibility of a reactor core meltdown in one or several of the reactors in the affected region threaten to turn this into a long-term catastrophe for Japan as well as the whole region. But we would like to focus on another aspect of the disaster, which is perhaps more relevant to us as traders, although we do share the feelings and suffering of the Japanese people as human beings.

We learn from reports and comments of Japanese engineers that the builder of the endangered nuclear reactors in Fukushima, Toshiba, did not exclude the possibility of the facility being struck by an earthquake, as well as a tsunami. To ensure that within the bounds of probability the reactor would be able to withstand the impact of an earthquake, a triple safety system was built, and it was thought that a meltdown  of the sort that the country`s now being threatened with would only occur if all these measures were to fail at the same time. This was thought to be safe enough from a practical point of view. As part of the design, and apart from the reactor`s own cooling system that receives its power from the local grid,  there is a backup generator that switches on when the main system fails. If both were to fail, a third system would intervene to convert the steam generated in the cooling process to water and pump it back to the reactor`s core so as to prevent overheating and melting.

But once again, as it often happens in the markets, what was thought to be impossible merely on the basis of probabilistic arguments was found to be inadequate in the chaotic environment of real life. What happened on Friday and the weekend is frequently summarized by news sources around the world.

We need to ask ourselves if the reactors would have been built in case that the engineers had foreknowledge of a disaster of this kind occurring, in spite of their calculations and confidence in probability measures. The answer is no. But they were built just like the LTCM built up its Russian government debt in 1990s, investment banks built their subprime portfolios in 2000s, and investors are building their stockpiles of government debt as part of a run to safety these days. The idea is that so many things cannot go wrong. But they can, and they always will do, if the experience of history teaches us anything.

The fact that black swans do exist, and that they can amplify tiny probabilities to extremely painful effect, is confirmed once again. If you don`t believe in something, don`t do it even if the whole world thinks it is the best idea of the century. If you don`t understand something well enough, don`t take related risks. For the trader, this is perhaps the most important lesson to be derived from the last few days` events among all the human suffering and tragedy.   

Radiation Hazard Forces Japanese Indoors as CDS Jumps

Reports of fires, explosions, and the release of hazardous materials into the air have become a daily feature of Japan-related news, and the situation appears to be getting worse as radiation levels at the Fukushima plant approaches levels that could severely jeopardize the health of the enginneers and technicians working to contain the situation.   

The CDS market is also nervous with Japan`s 5-year CDS yielding 116 bp, following a rise of some 23% over yesterday. Even China, in spite of its distance from the center of the crisis, is seeing its yield rise at 79 bps coinciding with a 7% daily rise. The other focal point is Bahrain, predictably, with its 5-year CDS being quoted at 350+ bps. Interestingly, TEPCO`s CDS have collapsed today with yields on similar maturity rising to 369 bps, corresponding to a jump of 191% in one day.

By contrast Japan`s stock market rallied rising by almost 6% today. It is reported that stock market performance has a very close correlation with radiation readings, indicating that traders are in panic  mode to a large extent. Today`s rise is probably a reaction rally inspired in part by the BoJ`s decision to inject another $43 billion into system, bringing the total to almost $400 billion, while doubling the size of the asset-purchase program first announced in Q3 last year. Comments by Nomura and UBS that stocks are oversold may have helped, too.

We are inclined to believe that Japans` economic difficulties are far from being over, with the tsunami and this latest nuclear nightmare further complicating an already desperate situation with respect to long-term GDP growth potential. Consumers locking themselves up in their homes for fear of radiation contamination can hardly be conducive to restarting a deflation-prone economy, and the acute need for new borrowing in this environment of private sector lethargy is sure to force CDS yields higher. It is unclear for how long the JPY can appreciate in this environment, since the only outlet for Japanese companies seems to be external demand, and even American criticism of currency manipulation will not be very loud as sympathy for Japan`s suffering remains the dominant feeling around the world. 

Yen Jumps on Risk Sentiment, Japanese Repatriation Pressure

Speculators around the world are worried that the earthquake, the tsunami, and the nuclear disaster will cause their casino to collapse on their heads, which naturally benefits the yen as it is the main victim fundament of all speculative games. It is inconceivable that without the perennial availability of easy money from the BoJ, any of the subprime, stock, or commodity bubbles would have inflated to the extent that they did.

The U.N. Security council holding a special meeting, the Japanese asking for help from the IAEA and the U.S., citizens locking themselves up in their houses hoarding food and goods, and warnings of massive blackouts in Tokyo and elsewhere have not placed the market in an exceptionally pessimistic mood today. We believe that this is a reaction to the last days` sharp sell-off, as bargain hunters try to get their hands on "cheap" stocks, while sellers take a break. But there is still some discussion among Japanese authorities regarding the necessity of putting the Nikkei Stock Exchange on holiday for a while.

At Fukushima, the pools that store the spent fuel of the past 20 years or so were exposed completely to the air yesterday after explosions destroyed the concrete casing of one of the reactors, and attempts to cool the fuel rods failed. Today the Japanese Self-Defense Force (SDF) was flying helicopters over the reactor building trying to raise water levels in the exposed fuel rods, but it is reported that the pools can hold up to 200 tons of water, so to fill them up the SDF must deliver nearly 50 tons of water per day, which may not be a very easy task. Additional support was brought in from the Japanese police force to spray water from 50 meters at the reactor with mobile fire-fighting vehicles. In both cases, radiation levels had previously prevented the activation of such plans, but now the risk to public health is so great that the Japanese government is understandably sacrificing some members of the security forces. The legal limit for radiation exposure has been doubled in order to maintain workers at the facility pumping, spraying pouring water on the fuel rods.

Gold is up, yen is back near 79 per USD and stock prices are all higher around the world today as the market shakes itself out of the gloom and doom mood to wait and see mode for a while. Nonetheless, with turmoil in the Middle East ongoing, and Portugal`s rating downgraded by two notches yesterday, there is ample cause to keep the mood suppressed and prevent a breakout from taking place. At the same time, perhaps one positive consequence of all this mayhem from the point of view of the speculator will be a slowing of the pace of Chinese rate rises and counter-inflationary measures. Provided that the Japanese crisis can come to an end in the near future, and Ben Bernanke smiling, markets may have reasons to find the upside more attractive.

USDJPY: US Dollar Japanese Yen Exchange Rate Forecast

Japanese Yen Looks to Extend Gains On Falling U.S. Yields