Thursday

Japan Underperforms

Post a Comment September 30, 2010 – 9:31 am |   | Permalink |  Print This Post |

Japans Nikkei has been hit by multiple issues simultaneously - China conflict, strong Yen, election challenge. Although there is a strong correlation between a strong Yen and a weak Nikkei, the impact has been disproportionate in our view. Swiss franc shot up (USD/CHF dived) since June 2010, but the Swiss exchange (in blue below) still correlates well with the Dow (yellow below). All eyes are on the USD/Yen at 83 , the level Bank of Japan (BOJ) intervened few weeks ago - a break would be interpreted as “failure by BOJ” and may result in an avalanche in USD/Yen (ie rise in Yen). Whilst we hate to long anything at the moment, we will open a fifth of our long quota to hedge our short NIFTY. We closed out our long Nikkei at 9600. Nikkei is currently 9379 - we will open $10/point long to hedge (1/5).

Nikkei vs Swiss Exchange

Yen vs CHF