To The Moon

market dynamics

$20+ Years+ U.S. Treasury Bond ETF-iShares(TLT)$ As a long-term bond ETF, the presence of large inflows suggests that the market expects interest rates to fall and bond prices to rise. And investors may be expecting a slowdown in the economy, seeking long-term bonds as a safe-haven asset. The market generally expects the Federal Reserve to cut interest rates in the future, which is a major reason for the inflows.

On the other hand, the yen fell to 160 against the dollar, the lowest since 1986, showing a sharp depreciation of the yen and a reflection of the market's reaction to the strong dollar. $Japan ETF-iShares MSCI(EWJ)$ $JPYmain 2409( JPYmain)$

Yen exchange rate at record low

Policy Implications: The Japanese government is finding it difficult to support the yen through policy interventions against the backdrop of the Fed maintaining high interest rates.

Market Impact: The depreciation of the yen may increase the cost of imports and put pressure on the Japanese economy.

Dollar Strength: The Dollar Index set a new high for the year, indicating an overall strengthening of the dollar against other currencies.

Demand for U.S. Bonds: U.S. bond auctions continue to attract buyers despite the strength of the U.S. dollar, showing that market demand for U.S. Treasuries remains strong.

Possibility of foreign exchange intervention by Japanese authorities

Difficulty of intervention: The inclusion of Japan in the U.S. watch list of exchange rate manipulators may have limited the Japanese authorities' room for intervention.

Authority Attitude: Moderate language from Japan's finance minister and foreign-exchange chief suggests that drastic intervention may not be forthcoming in the short term.

Capital Flows Trigger Yen Changes

Non-fundamental factors: The depreciation of the yen is not entirely based on economic fundamentals, but more due to market speculation.

Interest Rate Spreads and Arbitrage Trading: The difference in policy rates between the US and Japan has led to a prevalence of arbitrage trading, which has further contributed to the depreciation of the yen.

Japanese public: Japanese residents' exchange rate-neutral thinking reduces the risk of capital flight.

Foreign investment: Foreign investment in Japan has increased, especially in the high-tech sector, showing confidence in the Japanese economy.