Yen Value Declines after U.S. Government Takeover of Fannie Mae, Freddie Mac but Gains on Lehman Bankruptcy

The fallout from the heavily speculated government rescue of invalid mortgage giants Fannie Mae and Freddie Mac has already begun. In fact, the toll on the JPY was almost immediate after the announcement that the U.S. Treasury would take over as online trading activity tilted toward a rash of carry trades that sent the JPY to a 109.08 low.

“There were many investors that missed the dollar rally and therefore basically implemented weak long dollar positions and were forced to unwind those positions. A lot of that was initiated from the yen carry trades,” said Paresh Upadhyaya of Boston-based Putnam Investments in a recent Reuters article about how the Treasury’s decision will affect the dollar’s position in online forex trading. In the long term, however, carry trading may become unattractive, especially if commodity prices fall and cause U.S. interest rates to drop along with them.  
September has not proved wholly unkind to the euro. The yen gained against the greenback after the Lehman Brothers’ bankruptcy announcement on the 15th.