Intraday Market Thoughts

Archived IMT (2010.09.09)

by Ashraf Laidi
Sep 9, 2010 14:16

ANOTHER REASON WHY JAPAN WONT INTERVENE. In addition to the several reasons why Japan is unlikely to engage in yen-selling intervention (I mentioned those in countless interviews and IMTs found on this website) is that the currency is NO LONGER MOVING RAPIDLY. Yes, the yen is strong, standing at 9-year highs in trade weighted terms, BUT IT IS NO LONGER MAKING ANY SHARP MOVEMENTS.,.and sharp movements are the main culprit for central banks to intervene. Yen holds steady in the midst of the cross fire involving PM Kan & DPJ rival Ozawa. The latter vows to be nominated by his party for the PMiership at the Sep 14 run-off. Meanwhile, not a day passes without Fin Min Noda making a statement on yen strength, They are trying to change the script by showing they have not thrown the towel in the face of excessive yen strength. Therefore, they say they might intervene. But every FX player as well as Japanese officials themselves are fully aware that any yen-selling will bear no fruits beyond 1 or 2 trading sessions. Why? Because the yen continues to rally against currencies whose central banks are on the verge of some form of quantitative easing (Fed's stepping up treasury purchases, ECB extending 3 & 6-month lending facilities into Q1 '2011 and BoE hawk-dove balance tipped towards the latter Martin Weale and sharp slowdown in core CPI). They also know neither the Fed nor ECB is willing to coordinate in any yen-selling intervention, thereby, further rendering any yen decline short-lived. So bottom line, yes, we may see a stepping up of verbal intervention in upcoming days, and even see some selling but any yen pullback is seen short-lived. Ill be travelling on holiday for rest of week so updates will be less frequent than normal.


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