Skip to comments.Japan:G-7 OKs Yen-Selling, Spurring BOJ, Gov't Move(forex intervention: Yen falling)
Posted on 03/17/2011 8:26:04 PM PDT by TigerLikesRooster
Friday, March 18, 2011
G-7 OKs Yen-Selling, Spurring BOJ, Gov't Move
TOKYO (Nikkei)--Finance ministers and central bank governors from the Group of Seven agreed to intervene jointly in the foreign exchange markets for the first time in more than 10 years to curb the yen's rise against the dollar.
Officials from the G-7 held a telephone conference Friday morning to discuss the yen's surge against the dollar following the earthquake in northeastern Japan on March 11 and accidents at the Fukushima No. 1 nuclear plant.
Following the agreement, the government and the Bank of Japan intervened in the forex market at 9:00 a.m.
The coordinated intervention, requested by Japan, will be carried out in each country's foreign exchange market intermittently throughout the day.
The move represents a major shift in foreign exchange policy for the U.S. and Europe, which have not intervened in the currency markets since 2000.
Soon after the BOJ intervention, the yen dropped to the 81 yen range from above 79 yen.
But what does it mean?
Giving a breathing room for Japanese economy/industry. High Yen leads to falling export and rising import price.
Good question. But I’m sure it’s not good. Hopefully we’ll get a good answer.
I hope it helps. The disaster is a huge blow to the Japanese economy.
Is there a 1-2 sentence explanation for why disaster would cause the currency to rise?
The dollar will rise from its dangerously low position of the moment.
Also prevents a potential market driven rise in interest rates in Japan if the Yen continued to surge - and with their debt (though internally held) it could have impacted them greatly.
I could be wrong about this as i sometimes get it backwards when forex is driving it instead of paper demand or govt printing.
Just in time for Obama to take credit.
How true. Sad when someone elses poor currency makes ours look good.
“Is there a 1-2 sentence explanation for why disaster would cause the currency to rise?”
I have to confess this mystifies me as well. Quite frankly it makes no sense at all to me, especially in light of the fact that the Bank of Japan just printed the equivalent of two billion U.S. to try and prop up the Japanese stock market, and presumably will keep printing as much as necessary to prevent its collapse until Japanese money is worth less than the paper it’s printed on.
A lot of the Japanese debt (bonds) is owned by the Japanese people proper. Not a lot of foreign held.
It could be that they (nationals and companies) decided to hold everything they could in cash as a safety measure or as a reserve to help with the tragedy, which means no one was selling yen....so it was a lack of supply driven rise and not a demand driven one.
Only thing so far I can think of that would make sense and it ties with the very conservative nature of the culture.
Also craters the carry trade here in the US.
But that’s not something the BOJ should be supporting.
I was confused about why a natural disaster and a nuclear plant meltdown would cause a country’s currency to gain value. Obviously it did, but none of the articles explained it.
I’m sure that when it is explained, it will be obvious. But I’m just missing it now.
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