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Japan’s wild hedge fund ride – Doug Noland


From the WSJ (Gregory Zuckerman and Juliet Chung’s “US Funds Score Big by Betting Against the Yen”):

“Some of the biggest US hedge-fund investors have made billions betting against the yen, exploiting Japan’s determination to weaken its currency and boost its economy. Wagering against the yen has emerged as the hottest trade on Wall Street over the past three months… The growing trade has itself helped pressure the yen, which has slid almost 20% in about four months. That, in turn, is helping fuel what could become a world-wide currency war. Countries such as Germany and France have criticized Japan’s policies, while others have threatened to take action to reduce the value of their own currencies to remain competitive with Japan.”

And from the Financial Times (Sam Jones and Dan McCrum’s “‘Abe Trade’ Revives Macro Hedge Funds”):

“Shorting yen and buying Japanese equities, inspired by the dovish monetary bent of Japan’s new prime minister, Shinzo Abe, has been one of the most successful hedge fund wagers in years. And many believe it is a harbinger of greater macroeconomic dislocations and greater opportunities. Since 2010, the blue-bloods of the world’s $2tn hedge fund industry – so-called global macro managers – have been cowed by rangebound markets that have been dominated by choppy ‘risk on, risk off’ movements. Global macro stars, who specialize in trading interest rates, bonds and currencies to play the ups and downs of the world economy have not just struggled to make money, they have struggled not to lose it.”