Yen risk of falling on the Japanese economy of developing reconstruction
The Great East Japan Earthquake and later, the chances of dollar-yen exchange rate swings in the yen direction often is increasing.The March 17, temporary and update record highs and $ 1 = 76 yen 25 sen.Scene more than 80 yen level was also observed in June or later.
Behind and relationships for a variety of reasons have been discussed in the major media, but all reflected in the unnatural in the eyes of the author.In the background of the volatility of the market, and a distorted ultra-low interest rate policy, the shadow foreign speculators to find a flavor to this flickers.
Discomfort you feel the description of the soaring yen
“Yen buying edgy speculators that anticipate the reconstruction demand is accelerating,” “circle surge in overseas assets disposal of Japanese insurance company with a huge amount to pay” ….
Morning March 17, after the temporary dollar-yen exchange rate has soared to 25 sen same 76 yen, I was described in such tones the background of a sudden volatility newspaper, a major TV.
In addition to the unimaginable tsunami damage a large earthquake, the Japanese economy after the earthquake and the Fukushima Daiichi nuclear power plant accident was involved in a mess of unprecedented.In light of the economic textbooks, it was appropriate to the situation circle sold.However, the yen soared against the odds.Record of $ 1 = 79 yen 95 sen, which was recorded in April 1995 was unceremoniously broken.
The author, who served as market conditions correspondent long from ’95, there was a sense of incongruity in the description of any of the previously mentioned.
It’s a description of “pre-emption reconstruction demand” first, but it was understood from the early foreign investors of many, and has reached the scale damage of the earthquake the recent does not compare to the case of the Great Hanshin-Awaji former.Analysts of a U.S. management company, factory responsible for supply chain around the world to “Tohoku whole area were scattered.It points out that talking about five years, 10 years, not the span of one year and six months, reconstruction is impossible, “and the calculation of demand.
In fact, stock prices followed a trajectory that very easy to understand.Rate of decline of the major index such as the Nikkei average more than 10%, and became second only to reduce the collapse of Lehman Brothers and Black Monday.
Described in “Japanese insurance company with a huge amount to pay to be disposed of overseas assets” is also poor in convincing.Timing of after the earthquake hit the year-end, life and non-life insurance companies had prepared a thick cash originally.It is a story anyone know if reporters are experienced with the financial institutions coverage.In fact, industry associations and non-life cooperation is denied flatly the “main culprit theory”.Also financial market participants as well as author, should not uncomfortable tone of strong negative.
Relief foreign capital, speculative truth of coordinated intervention?
So, Where is the root cause of the yen surge.
“Coordinated intervention is strong color of foreign relief” ─ ─.Newsletter of this effect has been received from economists old friend In late March, I put full confidence from reporters era.The coordinated intervention, in response to the sharp rise in the yen March 17, refers to the intervention by the central bank of the major industrial countries moved to “buying yen-dollar selling” all at once.In a quick response in each country, the yen has been pushed back 81 yen level at a stretch.
Only in the report that this economist has touched a “foreign relief” dare, there is a truth of the historic high.
Earthquake before, higher interest rates view had emerged in Europe.In addition, monetary authorities were poised rate hike for inflation deterrence even in emerging countries such as China.For this reason, “it is a large amount raised circle for the time being there is no interest rate rise expected in low-interest, foreign speculators some, had been directed to financial assets around the world to this” (foreign securities).I is the so-called “yen carry trade”.
Other emerging countries in Europe and is also the time when economic recovery momentum had sprouted in the United States, I will be “the thickness of the yen carry went more slowly” (up).
However, this prospectus is destroyed in the Great East Japan Earthquake.
“In an attempt to keep you in the thick of year-end cash on hand, were reluctant to supply to the circle of foreign banks is some mega-banks” (foreign banks).For this reason, the interbank market by banks to each other to exchange funds “yen interest rates rise temporarily” and (same).
For speculators had raised a large amount of yen funds at low interest rates, rising interest rates but a matter of life and death said to be temporary.Were converted into foreign currency (borrowed) then raised circle, speculators to repeat the investment.”Be forced to eliminate positions in some cases” rising interest rates of species Qian in investing activities (securities company above).In other words, I leave the funds from all over the world, it is converted into dollars and euros, and he must be returned to the yen, the Tanezeni finally.The “return”, ie it’s mechanism of occurrence, of yen buying demand.It is possible to see the movement and led to the yen soaring.
Speculators can not raise funds in the interbank market.As a result, foreign banks are interposed as an intermediary.Foreign banks and foreign speculators, was the flexibility circle came to be threatened with a set.
Of that prevent that the Japanese economy weakened in the earthquake fall into the serious injury of dying due to excessive appreciation of the yen has been the motivation for coordinated intervention.However, in practice, “the size of the yen carry was greater than expected by the authorities” (The Economist), the national financial authorities also can not leave this, I have taken concerted action to.This is, is a composition economists previously analyzed.
I tried to hit this analysis to the financial authorities of executive old friend.Executives answered no comment, but if I match against the habit of he obtained in coverage of many years, the answer was “hit”.
Yen risk that may occur from now
Finally, let’s fortune and future prospects.
From early June, dollar-yen exchange rate is touching the yen direction again.This time, the future of monetary policy in the United States has become the focus undoubtedly.
FRB Chairman Ben Bernanke is as a statement of unusual to be a “slow as frustrated” about the recovery degree of the U.S. economy, speculation that the move away from the ultra-low interest rate policy or optimism, such as seedlings in early spring this year has not fit the bill on this warm sound.
On the other hand, speculation of further easing the Third to the “QE3” is smoldering status quo.Behind, there is a movement to accelerate speculative as a matter of course.
FRB if Fumikire to QE3, further long-term, dollar interest rates is possible to procurement of low-interest.The thickness of the “dollar carry trade” to increase in the same composition as the yen carry previous.On the other hand, although it has made any remarks unusual, the chairman does not emit a signal to a clear QE3.For this reason, the presence or absence of additional easing he holds the fate of speculators.
Additional mitigation of one stage not shown Federal Open Market Committee June 22 even (FOMC), situation of volatility of the dollar was avoided for the time being.However, the spark of turbulent and confidence issues to European countries such as the financial problems of Greece’s remains smoldering.
The thickness of the dollar carry if Mase QE3 is implemented, the circle will also be affected regardless of whether one likes it or not and the euro is a currency counter.The author likely to see volatility similar to circle the highest value at the time of the previous update occurs is large.
Dollar carry if Mase thickness, movement to invest in assets around the world by selling the dollar will accelerate.In the process, the demand for “buy” is also generated against the yen.It is necessary to assume that a scene in the Japanese economy of developing recovery, the yen risk unintended is befall.
Author: market hero
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