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Japan's rising interest rates may nail dollar?
Old 03-19-2006, 11:27 AM   #1
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Japan's rising interest rates may nail dollar?

Gosh, if it's in the WSJ then it must be true.

Tom Saler says that Japan's recent boost in its interest rates will make it unattractive for Japanese investors to keep borrowing yen and buying U.S. Treasuries. As their rates rise, they'll dump Treasuries and chase other investments. He says it's already happening and that it explains the recent rise in the interest rates of the U.S. mortgage market.

I think it's a bit more complicated than that and will probably take a lot longer to work out that way, but I can agree that the dollar is going down due to our own printing-press misconduct. I just find it hard to believe that everyone will ditch Treasuries in the process...

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Re: Japan's rising interest rates may nail dollar?
Old 03-19-2006, 06:57 PM   #2
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Re: Japan's rising interest rates may nail dollar?

Probably not because of sheer size of the worldwide money supply that has to go somewhere. But buying US$ the last few years has been pure hell for those on the outside (Euro, C$ A$, etc) on the wrong end of exchange rate changes.

Eventually, a lot more money managers will throw in the towel and put a lot more of their money elsewhere.
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Re: Japan's rising interest rates may nail dollar?
Old 03-19-2006, 08:50 PM   #3
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Re: Japan's rising interest rates may nail dollar?

I'm sitting on a fixed-rate mortgage of 2.6%, which is effectively 1.6% for the next 8-9 years after tax rebates. If Japanese government bonds go up even one percentage point, I will be making safe, easy money buying those instead of making extra payments on my mortgage. Given the housing boom lately, I know I'm not the only one; just about everybody I know seems to have gotten off the pot and bought in the past couple of years.

I wonder if this pressure will keep Japanese government bond rates from getting too high for a while. Not that it will do anything to make US bonds any more attractive, of course.

(I know, the plural of "anecdote" is not "data.")

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Re: Japan's rising interest rates may nail dollar?
Old 03-20-2006, 08:04 AM   #4
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Re: Japan's rising interest rates may nail dollar?

New word: anecdata... 8)
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