The Bank of Japan (BOJ) may not be wholly unhappy with the recent yen strength. Reflecting on when the dollar/ yen rate was pushing above 120.00 earlier in this summer, Rhonda Staskow, regional director of FX Americas for Thomson Financial IFR Markets, says levels above 120 concerned Japanese officials.
“They had been jawboning against a weaker yen as it approached 125.00,” she says.
Most Japanese exporters have a hedge target at the 115.00 level in dollar/yen. Woolfolk sees the dollar/ yen’s test of the 117.00 zone in early August as a significant event. The initial break of 117.00 on Aug. 15 opened a massive floodgate of dollar/ yen selling that took the pair to its recent low at 111.61 on Aug. 17.
“That was an important technical level that the market expected the BOJ to defend,” he says. “But, there was absolutely no verbal intervention. The failure to defend 117 caused an outright capitulation of the yen/carry trade.”
Subscribe to:
Post Comments (Atom)
Post a Comment