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Does supply and demand matter for the yen?

Key News
??? The Bank of Japan will raise its key overnight loan rate from 0.25 percent by March 31, according to 12 of 16 economists surveyed by Bloomberg News after the central bank published its Tankan business confidence report yesterday. (Bloomberg)
??? Unemployment in the dozen countries sharing the euro rose in August for the first time in almost three years. (Bloomberg)
??? Key Reports (WSJ):
7:30a.m. Sep Challenger Layoffs. Previous: +75.6%.
7:45a.m. ICSC Store Sales Index For Sept 30 Wk. Previous: -0.6%.
8:55a.m. Redbook Retail Sales Index. For Sept 30 Wk. Previous: +0.1%.
5:00p.m. ABC/Wash Post Consumer Conf. For Oct 1 Wk. Previous: -12.

Quotable
???The fool who persists in his folly will become wise.???

William Blake

FX Trading - Does supply and demand matter for the yen?

Is it about supply and demand? If so, maybe it??™s time for the Japanese yen to get into gear.

It appears demand for yen may be increasing, at least among business types, evidenced by a stronger than expected Tanken report from Japan yesterday. And as you can see from the chart below, courtesy of Gavekal Research, the supply of yen is decreasing, measured by Japan??™s tumbling monetary base (???Biggest drop since record keeping began.???)

Shrinking Japanese Money Supply Chart


Domestic Japanese investors are still looking offshore for yield. And there is talk of the yen carry trade back in play. But sooner or later, if growth momentum continues in Japan as supply of yen fades, the relative price of yen seems likely to rise. And given the potential land mines in the hedge fund world, the yen carry trade theme seems like an accident waiting to happen.

Jack Crooks, Black Swan Capital Black Swan Subscription-based Service