Email of the day (2)
Comment of the Day

September 14 2012

Commentary by Eoin Treacy

Email of the day (2)

on the Yen:
“Can't help noticing Yen is strengthening against $ once again, now below 78. Do you consider we are nearly at CB intervention time and if so would a small long position be a good idea?”

Eoin Treacy's view Thank you for highlighting the Yen which, as you point out is in an area where the Bank of Japan may be prompted to intervene. This article from Bloomberg carries some additional detail. As you will be aware, while politicians are very much in favour of a weaker Yen, the BoJ is still run by someone at odds with the idea. This has meant that betting on concerted intervention by the central bank has been akin to waiting for Godot. However as growth expectations deteriorate I share your enthusiasm that the time for additional stimulus has arrived, especially in light of the PBOC, ECB and Fed's recent actions. Let us address the chart facts.

The ¥76 area has represented a level where support for the Dollar has returned on a number of occasions since March 2011, most notably with short lived intervention by the BoJ. The February rally was powerful enough to break the 5-year progression of lower rally highs but the advance was not sustained and the Dollar returned to test the upper side of the underlying trading range where it has steadied. Today's upward dynamic suggests renewed optimism that the BoJ will act to weaken the Yen.

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