Some funding problems emerging in the yen trade as $3.1 trillion moves through JPYUSD contracts, but the Bank of Japan is on the case.
The Nikkei bounced back 5% to 6% overnight after falling a steep 16% over the last two days. At this point, the nuclear situation seems to be calming down a little and investors are rushing in to buy what appeared to be a very oversold market.
That said, we have seen a little panic selling and panic short covering on the back of the nuclear headline flow, so the situation remains highly mutable with 1% to 4% swings both up and down.
There is talk that government money is buying baskets of stocks to support the market into the close. Either way, JPY funding rates have spiked since yesterday and the Japanese currency is now staying in the low 80s versus the dollar.
At this point there is a rising chance that the Bank of Japan will step in again to inject more liquidity if there are further funding problems in the yen trade. Demand for yen has spiked as insurers and other Japanese companies all try to repatriate their foreign holdings at once, and the BOJ is taking care to accommodate them.
ETFs that purport to track the yen — like the WisdomTree Dreyfus Japanese Yen ETF (NYSE:JYF) or iPath JPY/USD Exchange Rate ETN (NYSE:JYN) — remain in focus.
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About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.