Cheap Cheap Cheap

I probably shouldn’t be happy about this…

The yen this week regained its status as the cheapest of the world’s heavily traded currencies to borrow, a shift that could indicate a stronger U.S. dollar is down the road.

— Yen Lending Rate Indicates Stronger Dollar, WSJ.

But, i am.

Dare you to read those two links and come away with a clear head!

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2 thoughts on “Cheap Cheap Cheap

  1. so, being a retard, I don’t understand any of that (and YES i read both links)
    in simple retards terms……should I sell my yen and buys dollars or the other way round…..

    yours Confused, croydon

    • Dear Confused,

      There probably isn’t a simple answer to your question. If you were / are sitting on a pile of dollars, and wondering if you should wait to convert them into yen, or do it now, you might infer from the Yen regaining it’s status as the cheapest currency to borrow, that holding onto the dollars for a while might be good. This is because someone borrowing in Yen is usually then selling the Yen to but assets denominated in other currencies, which in turn forces down the value of the Yen (more for sale -> lower price).

      There are also a lot of people out there betting (yes, betting) that the Yen will collapse under the weight of debt taken on by the Japanese Government. If nothing changes, and the requirement to continually increase the debt carries on, then it does seem inevitable that Japan will eventually run out of money. However, at the moment, there is a current account surplus, and that money can happily sit in low yielding government bonds. The ties between the MOF and companies are still strong enough that i doubt the companies will rebel. (Think of the alternatives: they could be required to pay more tax on their profits, which would reduce the amount of debt that government needs to take on… it’s much better to have higher profits and have the government in debt. Privatise the profits, socialise the loss!)

      In summary, no, don’t speculate. Keep what assets you have the in teh currency in which you can most easily turn them into things that you need to live.

      Or something like that 😉

Wise words...

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