Leveraged investors have borrowed in a number of currencies to invest in higher rates of return in the world. Specific currencies of interest in the “carry trade” would include the Yen and Dollar. If the de-leveraging process were to become meaningful, we would expect the Yen to rise in value as part of the unwinding process. In other words, levered investors would be selling assets and buying the Yen. Keep an eye on the relative performance of the S&P 500 relative to the Yen ($SPX:$XJY) for possible clues about the chances of de-leveraging as it relates to the unwinding of the Yen carry trade. Also, monitor the FXI, which is the ETF for the Shanghai Composite Index, for additional clues to the de-leveraging process.
For Tuesday, April 24, be prepared to comment on the outlook for the Yen and Dollar.
You may want to check out the following link for the dollar.
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