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Tuesday, May 01, 2007

USD/JPY: Japan FSA to Monitor Hedge Funds This Fall - Nikkei

Through the month of April, a number of global financial authorities have increased their scrutiny of hedge funds with the EU officials expressing concern and Bank of England warning in its stability report last week that the danger of a financial crisis has increased since last summer.

The BOE also highlighted the "overstretched" commercial property market and private equity. Now the concerns have moved to Japan with the Nikkei reporting this afternoon that the FSA will begin monitoring hedge funds, with funds expected to register in September when recent law goes into place. If this unnerves investors, the popular leveraged carry trades are likely to come under pressure.

USD/JPY is easing lower to 119.35 this afternoon with profit-taking seen on carry trade gains made earlier today. Offers remain very firm ahead of 120.00 but traders note a dearth of buying on the downside with Japanese investors and importers lowering their larger bids over the Golden Week holiday on expectations of a seasonal USD/JPY decline over the holiday.

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