New Japanese FX Intervention Fail; Gold At $1300

The Japanese government performed a second intervention in the foreign  exchange market Friday morning, but failed to strengthen its currency. As a consequence, the price of gold and silver jumps.

“We can imagine that the Bank of Japan will intervene again in more depth, so traders should be very cautious.”

Roberto Mialich


“I won’t comment,” the Japanese finance minister, Yoshihiko Noda told reporters in Tokyo Friday, as the market participants speculated that the government was intervening in the currency market for the second time in two weeks in an attempt to strengthen the yen. However, the result is only more uncertainty in the market.

“With the recent USD weakening, USD/JPY fell back under the symbolic 85. Given that the rumors are true, it may appear as they want to stabilize the exchange rate and prevent it from dropping blown 85 vs USD,” analyst Maren Romstad at DnB NOR Markets writes in Friday’s Morning Report.

The rather obvious intervention by the Japanese government gave the yen a temporary boost, but a few hours later the yen has fallen back under 85, and is trading around 84,3 at the moment.

In other words: Mission failed.

Investors Should Be Cautious

“Although the BOJ did not confirm it, it really did feel like there was a second intervention today, in dollar yen and that seems to have completely unwound,” says Boris Schlossberg, director of research at online currency trader GFT Forex, according to Bloomberg.

Adding: “The problem with the BOJ is they’re very dependent on U.S. data. Their task is going to get harder and harder unless U.S. data improves.”

Japanese government officials declined to comment on whether Prime Minister Naoto Kan’s administration had intervened in the currency market today after the yen slid against the dollar in Tokyo trading.

“I won’t comment” on intervention, Finance Minister Yoshihiko Noda told reporters in Tokyo.

Vice Finance Minister Fumihiko Igarashi earlier said that he hadn’t heard of any intervention, and a separate government official, speaking on condition of anonymity, declined to comment to reporters when asked whether Japan had sold yen.

“We can imagine that the Bank of Japan will intervene again in more depth, so traders should be very cautious,” Roberto Mialich, a senior currency strategist at UniCredit SpA says.

The yen dropped against most of its major counterparts Friday as traders speculated that Japan sold the currency to protect exporters.

Market Snap Shots

USD/JPY:

EUR/JPY:

GBP/JPY:

Gold And Silver Jumps

As a sign of increased uncertainty amongst the market participants, the price of gold and silver jumped today.

At the moment gold is trading around $1300 per ounce, and silver around $21,3.

GOLD:

SILVER:

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Related by the Econotwist:

Japanese FX Intervention: A Game Changer

Additional reading: The Japanese government also intervened in the currency market last week, on September 15th. The very same day, the Japanese central bank‘s deputy governor, Kiyohiko G. Nishimura,  held a speech at the Euromoney Japan Capital Markets and Global Borrowers Congress in Tokyo.

Here’s a transcript of the speech.

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Filed under International Econnomic Politics, National Economic Politics