G7 joint intervention occurred in the yen today. The market reaction was swift with a reversal of over 3 percent. This is the first time coordination has occurred in over a decade. The last time the G7 took coordinated action was in September 2000.
The whole yen affair since the earthquake has been out of the ordinary. A combination of a economic shock with strong central bank intervention should have pushed the yen lower without any intervention help. The BOJ has increased their asset purchase program to 1 trillion yen after the earthquake. In reality, the yen has rallied. The talk is that any companies, especially in insurance, have been bringing back capital to prepare for the rebuild.
It is supportive for the Japanese economy to have a stable yen, but the intervention should not have been necessary. The new question is whether further coordination will be necessary. Once the markets know that intervention is possible, there will be less threat to push the yen higher. Still exchange rates will react to the fundamentals and money will be needed to move back to Japan to help the economy.
The whole yen affair since the earthquake has been out of the ordinary. A combination of a economic shock with strong central bank intervention should have pushed the yen lower without any intervention help. The BOJ has increased their asset purchase program to 1 trillion yen after the earthquake. In reality, the yen has rallied. The talk is that any companies, especially in insurance, have been bringing back capital to prepare for the rebuild.
It is supportive for the Japanese economy to have a stable yen, but the intervention should not have been necessary. The new question is whether further coordination will be necessary. Once the markets know that intervention is possible, there will be less threat to push the yen higher. Still exchange rates will react to the fundamentals and money will be needed to move back to Japan to help the economy.
No comments:
Post a Comment