Chillin' out till it needs to be funded
In the most bizarre of global trade fulcrums, resting on a export led Japanese economy, the almost-nuclear tragedy post Tsunami has apparently caused a rise in the yen based on the inflow of $40bn from insurance companies that would have to be brought in for the reconstruction, prompting a dare all G7 intervention thence designed to keep the yen floating closer to 100 than stay floating ( ). While the Japanese Central bank is now fortified with G7 already pumping in $20bn to keep the Yen weak, the insiduous action against the nation reeling under the tragedy is likely to be nipped by the timely intervention.
That however still does not answer why the Yen would rise in the face of such debilitation of economic growth prospects and the sooner the markets hot ‘follow the sun’ desks can see this as an opportunity for correcting the yen to a weak currency evidenced by its weak economy the sooner the pacific island nation can return to a trail of growth and focus on rebuilding not just domestic demand but also a new economic equation led by harvesting of its export led surpluses for local development/redevelopment efforts.
In short, there was no reason for this intervention like any other blind intervention by governments in a free market economy, but in this case the economic crisis being created by currency movements seemed to be a direct subterfuge misdirected from the currency’s seemingly anti gravity pulls and pushes in contrast to the struggling national economy of Japan.
China seems to be especially ken to follow Japan into a surplus only but fixed currency peg mode and may be watching Yen keenly for hints on how the global currency markets can lose a judged longer term trend by speculation alone. China of course also had a busy policy weekend but that is another big one you’ll have to drink down with a lot of liquids..
With debt levels of 900 trillion yen in Japan also seemingly a cause for an appreciation of its currency whi;e globally the dollar corrects to new histoically low levels on parity with the aussie and the swiss among others, the Yen and the eastern kingdom of Japan faces a daunting task unless traders with a view on the economically weak equating to a weaker currency can start to get comfortable in the island currency which is unlikely till the intervention continues for almos a trillion dollars. The overnight monthly intervention in Shanghai(Beijing) has been of the tune of 100 billion Yuan or $15 bln bringing the Yuan 22 basis points up and the Yen is up from 76 to 81 since the 2 trillion yen from G7 came to break its rise on the weekend