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February 20, 2007


Anna Coulling

As a full time currency trader in the UK, I thought I would add my comment to your post on the Yen and the Japanese economy. In simple terms I believe there are several things to remember when trading the dollar yen or investing in yen assets. Firstly, the economy is unlike any other in the western world. It is highly dependent on its export markets which in turn are highly dependent on the strength or weakness of the yen. This in turn affects the speculation on the yen and in particular the carry trade which has been a favourite for many years due to the very low interest rates. This is likely to continue for some time to come and my own personal view is that the rates may be cut later this year back to 0.25%. Now bear in mind that a strong yen will adversely affect exports, and the interventionist Bank of Japan will ensure that this does not continue. In short, a recipe for a weak yen to dollar relationship for the foreseeable future. My personal view is that the pair will bounce back from below the psychological 100 barrier, back to somewhere between 105 and 110 in the short to medium term.

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