USDJPY- Time to Sell $1.33 trillion of foreign reserves?
The Japanese yen has lost almost a fifth of its value against the USD this year, lifting the price of imports and contributing to an eight-year high in the growth of Japan’s core CPI. Similar situation with EURO and GBP.
Could this be time for a global backlash against the Fed?
Possibly yes, as Masato Kanda, Japan’s leading currency official, said on that Tokyo had “taken decisive action” to address what it warned was a “rapid and one-sided” move in the foreign exchange market. It is the first time Japan had sold dollars since 1998, according to official data.
The U.S. Treasury has very calmly acknowledged the Bank of Japan's intervention in the foreign exchange, but stopped short of endorsing the move.
“The Bank of Japan today intervened in the foreign exchange market. We understand Japan’s action, which it states aims to reduce recent heightened volatility of the yen," a Treasury spokesperson said, when asked about the currency intervention.
Rates:
Japan is now the only country in the world to retain negative rates after the Swiss National Bank lifted its own policy rate by 0.75 percentage points on Thursday, taking it into positive territory and ending Europe’s decade-long experiment with sub-zero rates.
I see FEDS rising to maybe 5% and most likely GBP is expected to hike to probably 6%
The interest rate rises set off heavy selling in government bond markets. US 10-year Treasury yields, a key benchmark for global borrowing costs has soared.
It doesn't look good for anyone, especially smaller nations in debt....
Back to Japan: There is a lot of USD that can be sold and they have expressed the need to a 'currency market intervention'. That can only be expressed in selling USD at the moment.
Yen-buying intervention has been very rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and a rapid capital outflow from the region. Before that, Tokyo intervened to counter yen falls in 1991-1992.
Intervening by buying yen is also considered more difficult than by selling it.
In an yen-selling intervention, Japan can keep printing yen to sell to the market. But to buy, it needs to tap its $1.33 trillion of foreign reserves which, while abundant, could quickly dwindle if huge sums are required to influence rates.
Related articles:
reuters.com/markets/asia/boj-keep-ultra-low-rates-remain-global-outlier-despite-weak-yen-2022-09-21/
bloomberg.com/news/articles/2022-09-22/japan-has-a-pile-of-dollars-it-can-tap-before-selling-treasuries?leadSource=uverify wall
Could this be time for a global backlash against the Fed?
Possibly yes, as Masato Kanda, Japan’s leading currency official, said on that Tokyo had “taken decisive action” to address what it warned was a “rapid and one-sided” move in the foreign exchange market. It is the first time Japan had sold dollars since 1998, according to official data.
The U.S. Treasury has very calmly acknowledged the Bank of Japan's intervention in the foreign exchange, but stopped short of endorsing the move.
“The Bank of Japan today intervened in the foreign exchange market. We understand Japan’s action, which it states aims to reduce recent heightened volatility of the yen," a Treasury spokesperson said, when asked about the currency intervention.
Rates:
Japan is now the only country in the world to retain negative rates after the Swiss National Bank lifted its own policy rate by 0.75 percentage points on Thursday, taking it into positive territory and ending Europe’s decade-long experiment with sub-zero rates.
I see FEDS rising to maybe 5% and most likely GBP is expected to hike to probably 6%
The interest rate rises set off heavy selling in government bond markets. US 10-year Treasury yields, a key benchmark for global borrowing costs has soared.
It doesn't look good for anyone, especially smaller nations in debt....
Back to Japan: There is a lot of USD that can be sold and they have expressed the need to a 'currency market intervention'. That can only be expressed in selling USD at the moment.
Yen-buying intervention has been very rare. The last time Japan intervened to support its currency was in 1998, when the Asian financial crisis triggered a yen sell-off and a rapid capital outflow from the region. Before that, Tokyo intervened to counter yen falls in 1991-1992.
Intervening by buying yen is also considered more difficult than by selling it.
In an yen-selling intervention, Japan can keep printing yen to sell to the market. But to buy, it needs to tap its $1.33 trillion of foreign reserves which, while abundant, could quickly dwindle if huge sums are required to influence rates.
Related articles:
reuters.com/markets/asia/boj-keep-ultra-low-rates-remain-global-outlier-despite-weak-yen-2022-09-21/
bloomberg.com/news/articles/2022-09-22/japan-has-a-pile-of-dollars-it-can-tap-before-selling-treasuries?leadSource=uverify wall
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