Friday, March 18, 2011

Here Comes G7 And Pop Goes The...

And ... pop goes the yen.....

And ........ pop goes the N225.

  • Japan is expected to step into the currency markets to curb the yen's surge to record highs against the dollar and has a better chance of success if it wins the blessing of the Group of Seven industrial nations.

    G7 finance chiefs will hold a teleconference at 2200 GMT on Thursday and the foreign exchanges are abuzz with speculation that the meeting will address a sharp overnight surge in the yen that Japan has blamed on speculators.

    Japanese Finance Minister Yoshihiko Noda declined to comment on the possibility of currency intervention but said authorities were closely monitoring the market moves.
    Still, Japan's insistence that the surge in the yen seen since last week's earthquake in Japan is driven by speculation -- and the dearth of evidence to show Japanese capital repatriation is behind the move -- is prompting traders to brace themselves for sharper rhetoric and intervention.

    "If Noda is to be believed, i.e. that sharp yen gains are due to speculators rather than repatriation flows, then markets can be categorised as near disorderly," said Tom Levinson, currency strategist at ING.

  • Reuters) - The dollar spiked about 2 yen to above 81 yen on Friday, after the G7 agreed on joint intervention in the wake of the yen's surge to a record high the previous day.

    The dollar jumped to 81.20 yen from roughly around 79.20 yen. The dollar last stood at 80.65 yen, up 2.2 percent on the day, having pulled up from a post-World War Two record low of 76.25 yen hit on Thursday on trading platform EBS

  • “The Bank of Japan strongly expects that Japan’s concerted action with G-7 member countries in the foreign exchange market will contribute to the stable formation of foreign exchange rates.

    “The Bank of Japan will pursue powerful monetary easing and, to ensure stability in financial markets, will continue to provide ample liquidity.”


pica said...

Dear Moola,

Could you share your thoughts on why authorities should HAVE to intervene in the yen? Short term, exporters haven't even finished assessing damage to their facilities, and the capital Tokyo doesn't even have full power. The govt has also insisted that its not Japanese MNCs repatriating any funds, so why MUST the yen be weakened? Thanks.

Moolah said...

I would look at the yen carry trade and ask what's the consequences had BOJ not acted.

pica said...

The reason I asked is the points outlined here It's interesting that central banks embark on such large scale interventions without the soul-searching of 15 years ago. It seems to me exactly what PNB/ EPF/ KWAP etc have been doing for years, which in the long term damages the market and wastes money instead of long term efforts to address the root causes.