The High Yen is KILLING me

[JimR]

Seriously. What's going on with this exchange rate? Sure, I can buy stuff from the states for pocket change, but my company is in serious trouble, and forget selling anything...

The Europeans must be dying here.

Does anyone have any idea what's up with these exchange rates? What are the signs to look out for when things are changing? I wish I understood it better.

[MichaelP]

Actually the Yen isn't high, the Dollar is currently really low against all major currencies that aren't artificially pegged to it. For countries that depend on exports to the US market, like Japan, it adds on top of the credit mess.

It also creates a serious loss on the T-Bonds that are coming to maturity right now... which may explain why some countries are slowly divesting themselves from those instruments. There is also a wide-spread belief that the next bubble will be the governments obligations, due to the skyrocketing debt in most industrialized countries.

[JimR]

Ahhh, yes, the good ol' American Peso.

[MichaelP]

Just for fun, I ran the numbers for a 10 years $1,000,000 T-Note maturing this month.

A European investor would have lost €225,147 due to the huge exchange rate variation.

A Japanese investor would have made 円19,494,060 as the exchange rate variation wasn't as big.

[avatar1999]

I hear ya...I've wanted to get out of the US for Europe, or Japan for a while...maybe someday

[Pete_S]

I'm sure that the Japanese Gov't isn't happy about the current rates, they've done their best to keep the Yen weak since Japan relies on an export economy. No doubt your business isn't the only one that's in serious finical trouble b/c of this mess. I don't know if you can expect change anytime soon, its pretty widely expected that the dollar is going to go through some serious inflation b/c of all the spending thats going on, as stated.

Oddly, the dollar is relatively strong still against European currencies like the Euro and the Pound, they got caught up in the turmoil as well and actually lost alot of their relative value (the pound went from something like 2.15 dollars to 1.36 low point). Of course, thats still bad for the Yen, since that means those currencies are weak, but they are starting to gain strength, at least compared to the dollar, and I assume the Yen.

[MichaelP]

Relatively strong depends on the point of view, remember that the Euro was supposed to be lower than the Dollar (90c to the Euro from memory). The dollar lost about 40% on the USD/EUR exchange rate over the last 8 years.

[Pete_S]

I was mainly speaking of values relative to the immediate pre US economic crisis, where the Euro and the Pound were both at near record highs. I personally found the fact that the Dollar actually gained quite a bit of strength surprising, but I was unaware of just how tied up these foreign markets were in our economy.

[thebigspendur]

Well, all I can tell you is when I was in the Navy in the early 1970s and I was in japan it was 360 JPY to the dollar and we thought Japan was an expensive place then. I'm glad I bought my microscopes and Nikon cameras back then.