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Brazilian forex strategists are loosing sleep over what will “Mrs. Watanabe” do next. This is the nickname given by financial markets to the Japanese individual investors, mostly retirees over the age of 50 years and that often manage their portfolios through a home computer, which moves up to $ 20 billion per day, or about 30 % of total daily turnover of the Japanese currency, the yen.
The fear is that “Mrs. Watanabe”, who seems nervous about the turmoil in global markets, continue to sell their BRL-money and buy the into the yen safety in a higher volume, exacerbating the devaluation of the real and other emerging countries currencies. The yen is already up 12% this month against the real.
In recent years, the real-denominated assets, which offer far greater interest than the yen, have become a favorite destination of japanese individual (or retail) investors. While a 5-year Japanese government bond pays interest of 0.35%, its Brazilian-equivalent pays 12.2% per year.
These japanese investors generally choose to invest their money in foreign currencies and the so-called “Toshin” international mutual funds. Toshin funds hold a total of $ 1.1 trillion, with half that amount invested in assets denominated in foreign currencies. In recent years the Toshin funds in BRL-currency emerged as the favorite by japanese individual investors.
“The BRL is by far the most popular currency in Toshin funds,” the Associated Press was told by Tohru Sasaki, currency strategist of JPMorgan. He estimates that the Toshin fund dedicated to the Brazilian currency to be close to 5 trillion yen (U.S. $ 63.5 billion). “If the Real continues to decline against the yen, I believe that most retail investors will sell its Japanese Toshin funds dedicated to real,” said Sasaki. Moreover, the japanese equities market, reflected by the Nikkei index will be an important measure of risk appetite by Japanese investors. The more the Nikkei falls, the less appetite for risky assets, including the Brazilian currency, Sasaki said. So far this year, the Nikkei is down 14.93%.
The currency strategist at Japanese brokerage Nomura Securities, Yujiro Goto said that if the Japanese retail investors begin to sell foreign currency assets in greater volume via Toshin funds and, considering the current low-liquidity in the markets, the impact on the currencies of emerging countries, especially the real, will be significant.

Source: Exame

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