Short Yen

pjbltd

Hi

I'm looking for a way to Short Yen vs GBP to hedge my Japanese equity investments.
Any recommendations?
There are plently of Short Yen Long Dollar etfs but none I could find for Short Yen Long Pound.

I guess I could use etfs and go Short JPYUSD and then Short USDGBP to get Short JPYGBP.

Thanks

tradetime

I'm not big into currencies, but currencies pair are normally expressed in a particular way, as such it is USD/JPY and GBP/USD, perhaps pedantic, but important in knowing whether to be long or short it, ETF's do sometimes twist this relationship around I know, I just mention it to be careful.
Iam not aware of a single product in ETF form that would achieve what you want, but will have a look. In the meantime if your investments are significant have you considered opening a FX account (assuming your broker does not supply this) and just buying GBP/JPY pair, or perhaps a spreadbet on the pair, only problem may be leverage.

turbobob

You can get covered warrants on GBP/JPY e.g. http://uk.warrants.com/services/quotes/searchall.php?code=GBP%2FJPY These are similar to options. I don't know if these are any good for what you want to do though, and this is not a recommendation. You'd really have to look into it as they are complex products and can expire worthless. There is an education bit on the site I've linked to.

tradetime

Nice one turbobob, was going to suggest options, but haven't been able to find any that emulate a gbp/jpy cross

Sceptic001

IG Index do a GBP/JPY spread bet. Never tried it so I have no idea about leverage.

agsnu

Sceptic001 wrote: »

IG Index do a GBP/JPY spread bet. Never tried it so I have no idea about leverage.

Insanely leveraged - £1 per pip.

tradetime

Having looked at this further, whilst I suspect turbobob's warrants may well be the most suitable and perhaps precise way to achieve what you have outlined, another consideration would be to either short FXI or my own preference, buy put options on the same, I suppose the approach used depends on a lot of things, such as the size of position you are trying to hedge, the length of time you want to hedge it for, why you are trying to hedge it, as in is it simply precautionary or do you have a strong belief that Sterling will outperform the Yen going forwards, and of course how much available funds you have to deploy.

The problem with currency ETF's is that they are rarely if ever straight crosses, they are usually a base currency crossed with a basket which has a smoothing effect, most noticeable during times of high volatility.
Below is a chart of FXI compared with FXB, the Yen fund vs the British Pound fund
http://finance.yahoo.com/q/ta?t=2y&s=FXY&l=on&z=l&q=l&c=fxb
Looks productive until you look at the chart below which is a comparison of how the Yen fund compared to the YEN against GBP cross.
http://finance.yahoo.com/q/ta?t=2y&s=FXY&l=on&z=l&q=l&c=JPYGBP%3DX
You might also want to consider what could go wrong, if we were to hit a major relapse going forwards, stocks could take a serious beating, and the Yen as a safe haven currency could rise strongly, at least options / warrant route would cap downside risk on that position.

purch

ETF's would not give you a very efficient hedge. In many ways it would just create a separate open position that would need to be monitored, and might not move in conjunction with your original position.

The very essence of a Hedge is to close the risk of the position you hold, not create a 2nd level of risk.

A straight option would give you the most cost effective and efficient hedge, as would the products in turbo's link.

However, to be cost effective the original position would need to be of a reasonable size.

Another question would be how these JPY investments were made, as if they are through a collective investment, the manager will probably be hedging some, part or all of the Investment.

sabretoothtigger

Might be a reversal in trends soon apparently, UUP is a dollar index fund to watch.
I wouldnt want to hedge Japan as I dont think the pound is going to get especially stronger.

If dollar collapses the pound isnt going to benefit that much, more likely yen or euro, etc and if it rises back now that'll draw money away from the uk I think

sabretoothtigger

the japanese stockmarket goes down mostly in line with their currency strengthening against the dollar

Heres a vid to watch with some stats on currency

http://www.youtube.com/watch?v=ADVbkCf_b0M