Every country has their own currency, and it has been part of being an independent country. That is the good thing, the bad thing is the currency now trades relative to other currencies. Whatever product and services the country trades most with, the currency will be linked to it. For example, many of Australia’s raw materials goes to China, which means if the Chinese currency is higher, Australia’s currency is enhanced. There are other countries that depend on money sent back from citizens abroad.

When a currency trades, there will always be some currency traders who believe the economy will do well and others who believe the economy is not doing so good. Similar to stock trades – there will be those that are long and those that are short. A government is always biased their economy is doing well and it takes drastic actions before the government changes it view. Currency traders pay attention to the economy, but governments have measures try to prop up the currency.

The classic example is when George Soros shorted the English Pound, the government of the UK poured billions to try to prop up the Pound, but the economy was weak and interest rates were raised and George Soros made billions. A few months later he lost money on an Asian trade gone wrong.

In an article by Rae Wee and Ankur Banerjee of Reuters, the Japanese economy is weaker in part because of the Iran war made oil and gas prices higher. Japan imports 90% plus of its oil and gas. The Japanese money is called a yen.

The thing that makes this particular situation a little different is the Bank of Japan has spent $70 billion to try to prop up the yen in late April and early May. The US Treasury Department under Secretary Bessent is helping prop up the yen. Secretary Bessent was a currency trader with George Soros fund, prior to coming to the White House.

Mr. Bessent has been explicit about concerns regarding yen weaknesses, lending greater creditability to the prospect of sustainable yen strength, noted Carol Lye, portfolio manager at BGIM, a unit of Franklin Templeton.

Mr. Bessent has said that the US would consider increasing the size of the Federal Reserve’s repurchase facility called FIMA. The Treasury Department’s most recent currency report said the yen was undervalued and excess volatility in the currency’s trading was undesirable.

Currency analysts said the US used its holdings of euros to buy yen, bolstering its value without shaking confidence in the dollar. Secretary Bessent said it is important to have a stable yen. It is important to note Japan is one of the largest holders of US debt.

The Japanese Central Bank is looking at raising interest rates in September.

Linking to dividend paying stocks, many times these companies are global which is great thing. However, being global means there is a currency risk of what sort or another. For your investments, how much is the currency risk?

There are more questions than answers, till the next time – to raising questions.