BoJ Intervenes in the Yen Spread Betting Market
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The Bank of Japan finally decided enough was enough last night and came in buying around $3bn versus the Yen.
In the long run it is difficult to argue that they are throwing ‘good money after bad’ as a cross rate below ¥83.00 was patently absurd on valuation levels.
The country’s currency seems to defy logic as, aside from their trade surplus, virtually every other serious determining factor for valuation would indicate that these levels are too high.
The cross rate hit the long term bear support at ¥82.85/83.00 and obviously someone in the BoJ was looking at pretty much the same chart as we were in our comment. The cross has now bounced some 200 points in early morning trade from exactly ¥82.85 up to the current price of ¥85.20.
It has been quite some time since a major Central Bank has taken on the market but with the new PM in Japan looking for some breathing space on the currency front to enact his fiscal squeeze the events of last night are perhaps understandable.
The question we must ask is whether this heralds a more interventionist chapter in world markets? The rather extreme FX spread betting moves over the last decade have caused considerable problems. The Euro virtually doubled versus the Dollar from 2001 to 2008, the Yen has appreciated some 30% in the last couple of years and this ignores the Pound which has rarely been out of the headlines.
For this reason the argument about the demise of the Dollar seems really rather overdone. Global business is transacting deals almost exclusively in the Dollar. Until another floating currency challenges the Dollar’s hegemony, and this includes getting financial futures contracts traded in anything other than the Dollar, its pre-eminence will remain.
While the Dollar bounced sharply versus the Yen the same cannot be said against the other majors where the Euro and Pound had a strong session taking their crosses up to $1.30 and $1.55 respectively.
The moves were slightly odd in that US data was better than expected and one might have thought that this would lead to some Dollar buying. It appears that a) too many people were the ‘wrong way round’ and b) there was a certain sense that if the US numbers are good then Europe’s will be better.
Forex Spread Betting Markets Comparison
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| GBP / USD Daily - Spread Size |
2 |
2 |
2 |
2 |
3 |
0.8 |
2 |
2 |
| GBP / USD Daily - Min Stake |
£1 |
£0.50 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| GBP / USD Future - Spread Size |
8 |
8 |
12 |
8 |
8 |
- |
8 |
8 |
| GBP / USD Future - Min Stake |
£1 |
$0.60 |
£1 |
£1 |
£1 |
- |
£1 |
£1 |
| EUR / GBP Daily - Spread Size |
1 |
2 |
2 |
1 |
1 |
1 |
1 |
1 |
| EUR / GBP Daily - Min Stake |
£1 |
£0.50 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| EUR / GBP Future - Spread Size |
6 |
8 |
10 |
6 |
6 |
- |
6 |
6 |
| EUR / GBP Future - Min Stake |
£1 |
$0.60 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
| EUR / USD Daily - Spread Size |
1 |
1 |
1 |
1 |
2 |
0.8 |
1 |
1 |
| EUR / USD Daily - Min Stake |
£1 |
£0.50 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| EUR / USD Future - Spread Size |
8 |
8 |
12 |
8 |
8 |
3 |
8 |
8 |
| EUR / USD Future - Min Stake |
£1 |
$0.60 |
£1 |
£1 |
£1 |
£1 |
£1 |
£1 |
| USD / JPY Daily - Spread Size |
1 |
2 |
1 |
1 |
2 |
0.8 |
1 |
1 |
| USD / JPY Daily - Min Stake |
£1 |
£0.50 |
£0.50 |
£1 |
£0.5 |
£1 |
£1 |
£1 |
| USD / JPY Future - Spread Size |
8 |
8 |
12 |
8 |
10 |
- |
8 |
8 |
| USD / JPY Future - Min Stake |
£1 |
¥100 |
£1 |
£1 |
£0.5 |
- |
£1 |
£1 |
Comparison Notes
The above comments do not constitute investment advice and neither Financial Spreads nor Clean Financial accept any responsibility for any use that may be made of them.
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'BoJ Intervenes in the Yen Spread Betting Market' edited by DB, updated 15-Sep-10
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