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Bank of Japan Intervenes to Weaken the Yen

Posted by Joseph Trevisani on Feb 11, 2016 10:06:44 AM

The Bank of Japan intervened in the currency market in Tokyo after Usd/Yen broke 111.00. Officially the bank has had no comment.

The intervention drove the Usd/Yen from 111.41 to 113.19 in two minutes. Volatility was extreme, two minutes on the Usd/Yen was back to 111.70. Currently (9:58 am) it is holding at 112.46.

The Yen has gained 5.7 percent versus the Dollar since the BOJ instituted partial negative rates on January 29th.

The rapid ascent of the Yen in the past two weeks the face of a policy designed to weaken the currency has severely undermined the only success of Prime Minister Abe's economic program. Specifically the 60 percent devaluation of the Yen that began during his election campaign in 2012 and culminated in June of last year at 125.86. Since the Yen's nadir on June 5th the Japanese currency has soared 11.9 percent versus the Dollar.

The Yen's recovery has been prompted by capital flight from China seeking safety in Japan and by the growing market realization, partially confirmed by Fed Chair Janet Yellen yesterday, that the U.S central bank is unlikely to keep its goal of four 0.25 percent rate hikes this year.

Today was the first FX intervention from the BOJ in more than four years.

Joseph Trevisani
Chief Market Strategist

Charts: Bloomberg






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