posted by 4x-news on Feb 4

Despite backed by negative real interest rates, the Japanese Yen continues to grind upwards, threatening to break through significant psychological and technical barriers. From a monetary standpoint, the Bank of Japan is basically out of options with regard to limiting the currency’s upward momentum. Its sole remaining tool is its $1 Trillion in foreign exchange reserves, which it could release directly into currency markets to depress the Yen. It has been four years since Japan last employed such a strategy, and it appears reluctant to dip into the reserves again for fear of offending the G8, which has discouraged such action. The BOJ is also reluctant to build its holdings of US Treasuries (which would be a collateral requirement of holding down the Yen), because bond prices have become inflated. However, loss of face may soon become the least of its concerns, as the economy slides deeper into recession. Unless the notoriously thrifty Japanese consumers can be impelled to action, the Bank may find it has no other choice but to spur the export sector via a cheaper Yen. The Guardian UK reports:

The economic malaise in the United States and Europe is affecting Japan and Tokyo must act to keep the economy afloat, Nakagawa said, a day after the country’s central bank forecast that Japan would plunge into its deepest contraction in modern times.

posted by 4x-news on Jul 27

Some analysts are surprised by the evident unwillingness of Central Bankers to intervene on behalf of the Dollar, especially considering how common such “rescue plans” are becoming in other corners of the financial markets. Over the last couple months, all of the momentum that was previously behind intervention has gradually evaporated, such that at the recent G8 Summit, currencies were hardly even discussed. This is somewhat ironic considering the Dollar has resumed its downward trend, and even touched an all-time low against the Euro. Treasury Secretary Henry Paulson and Fed Chief Ben Bernanke aren’t willing to completely write off intervention, however. Both have commented explicitly that it is still being mooted as an option. Nonetheless, the current consensus among analysts is that unless the Dollar completely collapses, it’s not likely. The Associated Press reports:

“It would take a rare set of circumstances to get the U.S. right now to intervene,” said David Gilmore, a managing partner in Foreign Exchange Analytics in Essex, Conn.