The Prospect of Yen Intervention

5 May, 2016

We should not be surprised that the yen is taking a breather after the out-sized moves at the end of last week. During the generally weaker dollar phase seen over the past 24 hours, it’s the only major currency to have weakened against the Greenback. Should we worry about BoJ intervention? It’s certainly something to consider, given the extent of the recent moves. Central banks find it very difficult to fight the underlying trend in markets; even the might of a central bank balance sheet often fails to counteract the underlying will of the market and fundamentals. That said, what often worries central bankers more is the speed of moves. Of the G10 currencies, the pace of appreciation has been twice that of most others since the end of January. So from a valuation perspective, the case is weak, given that the yen remains undervalued on many longer-term measures. On the pace of appreciation, the case is stronger, but the effects of this are more likely to be temporary given that the intervention would go against the underlying trend of the market.

Looking ahead to today, it seems that most markets are likely to be in a holding pattern ahead of the US jobs data tomorrow. We’ve seen USDJPY and other majors move away from the lows and highs marked out earlier on in the week. Sterling will be looking at the services PMI data at 08:30 GMT after the weaker manufacturing numbers earlier in the week, which suggested some restraint on the part of firms ahead of the EU referendum next month. Otherwise, we’re likely to see markets holding back ahead of the US Employment Report tomorrow, where the ADP data yesterday suggested a weaker headline reading. We’ll see…


Source link  
US Inflation Disappoints

US Consumer Price Index data was released and failed to impress the markets. With US gasoline prices spiking, following the disruption caused by the recent Hurricanes...

Can CPI Follow PPI Lead?

In early Friday trading, the markets are relatively static as they wait, in anticipation, for today’s US inflation data that will potentially give confirmation...

Fed Minutes: Inflation Conundrum

USD broadly declined as the markets digested the release of last month’s FOMC meeting minutes. Many FOMC Members are still concerned...


UK output data falls but expectations rise

On Sunday, The Confederation of British Industry released their monthly indicator of output for UK manufacturers, retailers and service companies...

US Economy Growing Faster Than Forecast

Data released on Thursday indicated that the US economy grew at a faster pace in Q2 than expected. The US Commerce Department released...

New Fiscal Year Could See Changes

With many countries entering a new fiscal year in October, many investors are summarising this past year’s portfolio performance while setting new goals...


New US data did not add positive

Published data on construction activity in the US in August slightly exceeded expectations. The number of building permits reached...

Interest Rates in Focus

On Monday, at a speech at the International Monetary Fund in Washington DC, Bank of England Governor Mark Carney stated that any increases in UK interest rates in the future will be both...

US Data Fails to Impress

On Friday, the US Commerce Department released Retail Sales showing a drop of 0.2% in August, the biggest decline in 6 months. The markets had expected...

  


Share: