The tide has turned for the Japanese yen as the credit market collapse is sending the currency way back up, and exchange traded funds (ETFs) will follow.
This same credit market collapse that sent Lehman Brothers down also sent borrowing costs sky high in Europe and is now beginning to unwind the carry trade.
Ye Xie for Bloomberg reports that after seven years of providing the cheapest source of funds for investors buying higher-yielding New Zealand dollars, Australian dollars and Brazil reals, the yen is appreciating as $584 billion of subprime mortgage-related losses force banks to restrict credit. The CurrencyShares Japanese Yen (FXY) is up 9.6% year-to-date
Likewise, the trend reversal is causing commodities to sink to the biggest annual decline since 2001, as investors leave leveraged bets and the slow economic growth is taking away demand for raw materials.
Shruti Singh for Bloomberg says the value of the 19 commodities in the Reuters-Jefferies CRB Index fell $280.6 billion, or 43%, from its July 3 peak, a loss larger than their total worth two years ago, data compiled by Bloomberg show.
Meanwhile, slower expansion in the United States, China and India is also undermining prices of crude oil, which fell 39% off the high, and corn, which is down 46%. Oil today closed down more than 6% to $88 a barrel, reports Matthew Robinson for Reuters.