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JPY

Discussion in 'Market Predictions and Reports' started by Tiger21, Sep 24, 2009.

  1. Tiger21

    Tiger21 Private

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    The yen is appreciating relative to the dollar, hitting 90.49, on speculation that companies are repatriating funds before the end of the fiscal first half. With the three day weekend there are a lot of yen purchase orders from exporters. This could provide additional strength for the yen for a nice short-term trade the next day or two. Buy yen.
     
  2. Tiger21

    Tiger21 Private

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    The new Japanese government and the Bank of Japan have previously shown interest in a stronger yen in an attempt to decrease the importance of exports in hopes of increasing consumer spending, however, now they have come out and said that they may take action in markets after the yen reached an 8-month high. The new government had decided to allow the currency to float according to market participants instead of following its policies of the past of buying dollars and selling yen. Also, Japanese interest rates are no longer the lowest in the world, exposing it less to the carry trade and less selling of the yen. The combination had fueled a rally in the yen to <90.
    Finance Minister Fujii, after coming into power two weeks ago, said the idea of a weaker yen helping the nation’s exporters is “absurd,” and he opposed governments stepping into currency markets “in principle.” Now he comes out with “If the currency market moves abnormally, we may take necessary steps in the national interest.” Two contradictory statements. It’s essentially importers vs. exporters.
    I think long-term the yen needs to lose value. The demographics of the country are not positive. The economic fundamentals of the country are not positive. And now Fujii says they will buy dollars.
     
  3. Tiger21

    Tiger21 Private

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    Looking at Bloomberg analyst estimates for Japanese interest rates: 14 of 16 analysts expect interest rates to stay the same at 0.1% through the end of 2010. Reports Tuesday showed consumer prices fell a record 2.4%. A strong yen and deflation could be very dangerous for Japan’s economy. The trend since April has been for a strong yen, but I think a reversal is in order – especially considering the change in policy by the administration and a now increased willingness to intervene in the foreign exchange markets.
     
  4. Tiger21

    Tiger21 Private

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    Reading speculation that the BoJ comments were a head fake, given to appease exporters and manufacturers and really the BoJ truly wants a stronger yen long term. As soon as next month the BoJ may decide to let its emergency corporate-debt buying programs expire. If that’s the case, it is clearly favoring a hawkish monetary policy.
     
  5. Tiger21

    Tiger21 Private

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    Japanese Finance Minister Fujii is drawing criticism for originally favoring appreciation in the yen and now stating that the BoJ will intervene in foreign currency markets and will act to restrain the yen if it shows excessive moves in a biased direction. He declined to say if it is currently trading in such a way, but I’d expect weakness in the yen.
     
  6. Tiger21

    Tiger21 Private

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    Reading that traders believe that Asian central banks bought dollars in the foreign exchange markets to prevent their currencies from appreciating against the dollar in an attempt to help the domestic exporters. The Japanese have expressed this possibility but haven’t done anything, but I would expect some action in the near future as the yen continues to show strength relative to the dollar. Fujii said in an interview, "I for one do not believe that authorities should intervene in foreign-exchange markets in an excessive way. However, if forex market movements are outrageously reckless, or acting without any order, then I think some kind of measures are needed." He added, "Looking at the current situation, I don't regard it as being extremely abnormal."
     
  7. Tiger21

    Tiger21 Private

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    Speculation on the part of investors that the Bank of Japan will be quicker in withdrawing emergency stimulus than the US seems to be continuing to drive strength in the yen. It is possible that the Bank of Japan will be faster, but I think a more interesting factor is the yield difference between 10-year Treasuries and similar maturity Japanese government bonds – the yield advantage on the US Treasury narrowed to 1.92% from 2.01% at the end of last month. The appeal for US securities and dollars is diminished as investors want higher yielding currencies and assets.
     
  8. Tiger21

    Tiger21 Private

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    The natural direction, notwithstanding the recent jump off of 88, is for the yen to continue to appreciate relative to the dollar. If the BoJ starts buying dollars then it is fighting the market in order to try and support a weaker yen - sustainable for some time, but not long term. I think there are easier pairs at this time, no need to force something as the near term situation looks more convoluted than other pairs.
     
  9. Tiger21

    Tiger21 Private

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    The yen rose against all 16 major currencies after data from Japan’s central bank, which kept its benchmark interest rate unchanged, worried investors that deflation will deepen as the Bank of Japan report showed producer prices fell for a ninth month. Now Japanese Vice Minister Naoki Minezaki is on record saying that dollar weakness is likely to continue and Japan shouldn’t intervene in currency markets.
     
  10. Tiger21

    Tiger21 Private

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    The yen went down a little on news that Japan retail sales slid for the 13th month in September. Sales were down 1.4% from a year earlier although analysts estimated that it would be down 1.6%. Last week’s five-day Silver Week holiday was expected to drive sales, but reports that unemployed and smaller bonuses is leading to frugality on the part of consumers which account for 50% of the Japanese economy. I still don’t like the yen.
     

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