By: Dr. Mike Campbell
The value of the Japanese Yen took a sharp fall against the US Dollar, weakening by almost 0.8 Yen in the initial market response. Speculation is rife that the sharp fall was triggered by the Bank of Japan intervening in the market to buy Dollars and sell Yen. The initial episode, last week, was triggered when the Dollar fell below the 84 Yen mark. Bank of Japan action pushed the Dollar back close to the 86 Yen mark, but over the course of the week’s trading, the value had slipped back to around 84.3 Yen to the Dollar.
Response to the current intervention has been swift. Within hours, the Dollar had come off its high and the 0.8 Yen rise currently stands as “only” a gain of 0.4 Yen, presumably as some traders are making a quick profit on the Dollar-Yen pair. As I write this, the Dollar is buying 84.79 Yen and is trending higher. It remains to be seen if this impulse will lead to a higher sustained value for the Dollar against the Yen, or if it will be the first of a number of repeated cycles of intervention.
The Yen has hit 15 year trading highs against the Dollar recently. It is widely acknowledged that a strong Yen is likely to hinder the Japanese recovery since the economy is export-driven and an expensive Yen hurts the competiveness of Japanese goods abroad.
The Yen was trading at around the 92 mark against the Dollar at the start of the year. The Japanese PM has previously stated that he would like to see an exchange rate of 105 to the Dollar. The currency is trading at 112.9 against the Euro, but was at 133 Yen to the Euro at the start of the year
Bank Of Japan Intercedes In The Market For A Second Time This Week
Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.