The Yen

[jdmc45]

Hi there,

I was wondering if someone can give me a fundamental explanation as to why the Yen has recently skyrocketed to the highest levels since WW2?
The Japanese government in the past week or so has injected something along the lines of 34 trillion yen into the system to keep things going as usual. With this huge excess supply of money I would think the yen would plummet?
One explanation could be the excess demand to supply for Japanese goods now that all the automobile factories are down for operation for example. This would inflate the prices of exports significantly and affect the yen by increasing its value. Is this sound logic?
Anyones thoughts on this would be much appreciated.

Thanks,

James

 

[Martinghoul]

It's the repatriation by Japanese retail (Mrs Watanabe) and the expectation of repatriation by large insurers.

 

[jdmc45]

Ok. And the huge capital injection of yen into the system had negligible effect compared to this actual and expected repatriation of funds?

 

[Martinghoul]

Ok. And the huge capital injection of yen into the system had negligible effect compared to this actual and expected repatriation of funds?

It would appear this way... Explicit intervention was more effective.

 

[jdmc45]

Thanks for your replies Martinghoul

 

[sk1105]

Look at what happened to the Yen after Kobe. Exactly the same applies here. With their historically low interest rates, the Japanese are big on putting their hard-earned in foreign assets. When disaster strikes, they liquidate those positions as fast as they can, i.e. massive surge in demand for Yen = appreciation reason no.1

Reason no.2 is just because it's that time of the year. End of the financial year when Japanese companies call up the earnings from their foreign operations. Again, needing to convert into Yen, so rise in demand and therefore appreciation.

The two happening at about the same time as USDJPY being at its all time lows resulted in a massive breakout to the downside of that pair (i.e. massive appreciation of Yen), which got the BoJ pooing bricks. It's likely we'll see further Yen selling interventions in the coming weeks so keep a look out. It's free money for the quickest traders.

 

[TraderJW]

This is certainly a hot topic at the moment. Will intervention by the G7 work? That is the big question. The last time the G7 intervened in the currency markets was back in Sept 2000 during the euro confidence crisis. On that occasion they managed to bolster the euro up so I suspect they will achieve their goal for the yen too but over the longer term.

In the shorter term we could see more repatriation of funds and currency speculators testing their appetite for intervention.