Half of Japan firms want intervention if yen jumps
Reuters, Thursday December 4 2008
TOKYO, - Nearly half of major Japanese firms want authorities to intervene to
prevent the yen from rising beyond 90 yen to the dollar, to support Japan's
export-driven economy, a Reuters survey showed.
The yen hit a 13-year high of 90.87 yen to the dollar in October, and traders
say it may climb past such a level in coming months, as investors continue to
shun risky carry trades due to credit market turmoil and fears of a global
recession.
"A recovery of the export industry's earnings is important for the Japanese
economy at this stage," said a company in the services sector.
Japan slid into its first recession in seven years in the third quarter as
exports crumbled.
Exporters have been the main engine of growth for Japan's economy, but data
released last week showed that manufacturers have forecast their biggest ever
quarterly fall in output in the fourth quarter, fuelling worries of a deep
recession.
The yen's historic jump in October was partly due to the unwinding of carry
trades, in which investors sell low-yielding currencies like the yen to fund
investment in higher-yielding currencies and assets.
By Akiko Takeda - reuters.com
======================
======================
Bank of Japans Ready to Intervene Against the Yen's Rise.
Sean Hyman from World Currency Watch says watch out, the Bank of Japan is not
one to be reckoned with. They are ready to intervene to stop the Yen's rise -
and you don't want to test them.
And our pal and trusted currency advisor, Chuck Butler at the Daily Pfennig,
agrees with Sean in his letter today:
" And... While I don't want to spend the whole letter today on Japan... I must
say that I think we should all be very wary of the BOJ and their history of
intervening to keep yen weak. This will be a huge battle between the Carry
Trade unwinders and Uridashi Bond sellers VS the BOJ... Just don't get caught
up in it... If it happens, stay to the sidelines, you don't want to get caught
up in an intervention battle.."
--- --- --- --- --- --- --- ---
The Bank of Japan Says “Make My Day!”
--- --- --- --- --- --- --- ---
Interventions are rare occurrences, but when they happen traders definitely
have to pay attention.
Historically speaking, the Bank of Japan has launched more interventions than
any other central bank around the world. They have tons of reserves, so they
have the cash readily available all the time to force the yen higher or lower
The last time they did this was in March of 2004 when the USD/JPY exchange rate
was at 103.42. They went into the market, unannounced, and shocked traders by
selling 14.8 trillion yen (approximately US$157 billion). They also sold over
20 trillion yen back in 2003.
--- --- --- --- --- --- --- ---
Don’t Bother Betting Against the Central Bank - You’ll Lose Every Time
--- --- --- --- --- --- --- ---
You need to take note when central bankers warn you that they’re “ready to act
quickly” as they said yesterday. After all, who wants to be on the wrong side
of that trade when they sell trillions of yen? Not me!
I’d rather be on central bankers’ side than against it.
Moral of this Intervention Story
When currencies start to reach extreme prices, listen to what the central
bankers are saying. Central bankers will tell everyone if they’re going to
intervene, so you need to pay attention in order to trade with the central
bankers and not against them.
The last time I saw the Bank of Japan intervene, it was too late to get out if
you were already holding yen. The BoJ intervened so quickly and sold so much
yen at once, that traders didn’t have time to sell their yen pairs.
The moral of the story: Take these central bankers seriously when they talk
about intervening in their currency. These central bankers have the ammo needed
to hurt your trading account if you go against them. So make sure to heed their
warnings.
News Sources :
All Materials on This Page Copyright 2008, World Currency Watch
Sean Hyman, Our Resident “Professor FX” and Long-Time Currency Analyst
Explaining How You Can Succeed in the Currency Markets.
Sean Hyman spends his days teaching his fellow professionals in the industry
how to trade the $3.2 TRILLION currency market. Now he brings his 15 years of
financial experience to you. From long-term currency strategies, to quick
FX-trading moves usually reserved for the professionals, Sean will tell you
everything you need to know to succeed in the currency markets
