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Realistbear

More On The Yen Carry Trade--sterling Impacted Today

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http://today.reuters.co.uk/investing/finan...RLING-CLOSE.XML

Sterling slips on mortgage approval data

Mon Feb 27, 2006 3:42 PM GMT

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LONDON, Feb 27 (Reuters) -
Sterling slipped against the euro and dollar on Monday after data showed approvals for British home loans, a key indicator for the property market, fell to their lowest level in 12 months in January.
But the pound shrugged off news from property consultant Hometrack that British house prices rose for a third consecutive month in February and at the fastest pace since June 2004.
"The data has been mixed and sterling is under pressure. The mortgage approvals was disappointing although it could be due to seasonal factors," said Ian Stannard, senior currency strategist at BNP Paribas.
Sterling also hit a six-week low against the yen at 201.71 yen <GBPJPY=> as the Japanese currency rallied on expectations that Japan will soon end its ultra-easy monetary policy and eventually raise interest rates.
"Sterling/yen was a popular carry trade and that is having a spill over effect on other sterling crosses," Stannard said.

The ending of cheap money supply from Japan is beginning to work itself through the system. Could the UK be faced with an IR hike as early as next month?

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The ending of cheap money supply from Japan is beginning to work itself through the system. Could the UK be faced with an IR hike as early as next month?

RB. I very much doubt we'll have a raise next month - that would be dramatic. However, the way things are looking, I'd say we could see UK IRs going up in the summer. Two points:

1. The chances of an IR reduction are now almost negligible.

2. The upside risk to IRs has increased steadily over the last month.

Go figure.

BTW you're right about the Sterling/Yen carry trade. The current situation is precarious and investors are taking no risks with Japan getting more upbeat.

A point to make is that carry trades are often heavily leveraged and thus have to be hedged. The new stance by Japan is going to have unexpected and dramatic effects. The BoE would be wise to keep a close eye on this situation.

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  • 337 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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