ZuluTrade Blog

Mid & Long Term

The Japanese Yen - The Great Bet

Tuesday, November 22, 2011 3:00 PM GMT

There is a great interest in the rate of the US$ versus the Japanese ¥. At the end of October, after a constant falling of the US$ against yen, the rate found itself at the historical lowest level of 75,55. The intervention from BOJ, which at that point of time was pretty much expected, brought the rate again above the 79,00 level. For the time being, the rate stands in levels that had never reached since April of 1995. Both JPY and CHF, are the most gainful currencies during the last 3 years, due to the 2 consecutive crises that wounded the global economy. The first crisis burst out mostly because of the toxic bonds, linked to the mortgage-backed loans, held by US banks. The second one, was caused by the world debt crisis, which leads to great concerns about its potential consequences.

Nevertheless, the strengthening of a currency can’t last forever. Last months, there have been lots of reports from Japanese officials regarding the JPY undesirable levels . However, their actions such as this of 30th October, had limited impact. This behavior depicts that BOJ doesn’t want a further strengthening of its currency and simultaneously doesn’t want to bring it back to much higher levels, like SNB. Furthermore, we should bear in mind that the intervening capacity of BOJ is much bigger of SNB.

An intriguing scenario which may be extremely interesting, is the BOJ reaction to a potential break of 70,00 levels. In this case, on my own belief, there will be increasing probabilities to observe a BOJ behavior similar to the SNB one. That means, that there will be an intervention of great impact and the rate will gain 1000-2000 pips, touching the 80,00-90,00 level.

Comments are closed

Trading spot currencies involves substantial risk and there is always the potential for loss. Your trading results may vary. Because the risk factor is high in the foreign exchange market trading, only genuine "risk" funds should be used in such trading. If you do not have the extra capital that you can afford to lose, you should not trade in the foreign exchange market. Forex Brokers and ZuluTrade are compensated for their services through the spread between the bid/ask prices or there may be a cost to initiate a trade through the bid/ask spread. Signing up is totally free, and there is NO contract and NO monthly fees, ever.

This blog is for informational purposes only. This blog is not intended for distribution channels and may not be reproduced or distributed without the permission of Zulu Trade ltd or any of its affiliated entities (“ZuluTrade”). All opinions, news, prices or other information contained in this blog are provided as general market commentary and this report does not contain and it is in not to be considered in any circumstance as market analysis, offer or solicitation to buy or sell any financial instruments, personalized or general recommendation for any investment decision or investment strategy by ZuluTrade, in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this blog should not be construed as financial or investment advice on any subject matter. The financial instruments referred to herein may not be suitable for all investors and any investments on such financial instruments requires the assessment by each investor and its counsels of the investor’s investment characteristics, including the investment risks which the latter is willing to assume. This blog has been based on information which has been made public, obtained from sources believed to be reliable, but it has not been verified by ZuluTrade. No representation or warranty (expressed or implied) is made as to the accuracy, completeness, correctness, timeliness or fairness of the information or opinions herein, all of which are subject to change without notice. No responsibility of liability whatsoever of howsoever arising is accepted in relation to the contents hereof by ZuluTrade or any of its directors, officers, employees. Further, no representation is being made that any results will be achieved, and past performance is not indicative of future performance.