OldVet: European Stocks, Yen and Dollars

This one is by OldVet…


Here is a startling fact, from the Financial Times of London, written by a US investment advisor. When the Yen rises against the Euro, European stocks fall. When the Yen falls, European stocks rise. I haven’t checked but since worldwide equity markets tend, these days, to swing together (synchronized trading) it would also apply to the US stock market. I think it’s because of the carry trade, or cheap borrowing from Japanese banks that are routinely used to buy US and other stocks around the world.

In recent months the Yen has gone from about 120 Yen to the Dollar, to 110 Yen to the Dollar, which is about a 9% strengthening of the Yen against the Dollar. If the correlation holds and the trend continues, as many large banks like Citi are saying, an investor then asks themselves this question: Is it better to invest in Yen, or to sell US stocks? Both of these actions are equally easy to do.


This one was by OldVet.