The Nikkei Gives Us the “Told Ya So” Piece We’ve Been Waiting For

August 21, 2007
By Ken Worsley

When the yen shot up to the 113-114 range to the dollar soon after breaking the psychological mark of 115 on Thursday, it was not U.S. and European hedge funds that were seen desperately buying yen but Japanese housewives and other individual investors…

…[I]ndividual traders continued to sell yen even when hedge funds were unwinding their carry trade positions. When the yen rose sharply, they were forced to buy back the Japanese unit at a loss.

Trading systems broke down at two margin trading firms because of a sharp rise in order volume. Some firms were even temporarily unable to display cross forex rates on their electronic boards because of market volatility.

Those who were unable to execute their desired transactions might come to distrust the market system as a whole. And it remains to be seen whether individual investors, many of whom have now suffered significant losses on margin trading, will resume selling yen right away.

Of course people got burned. But so did the Nikkei by not backing up this piece with some numbers that actually relate to the conclusion in the first paragraph.

There were plenty of housewives out shopping and spending money today in Omotesando, that’s for sure. Let’s see how this effects August retail figures when they come due…

Filed Under Exchange Rates, Forex