Japan Exchange Group’s Post

(Bloomberg) -- Japan likely stepped into the currency market for a second straight day on Friday, a Bloomberg analysis of the central bank’s current account indicates. Tokyo’s latest market entry was likely around ¥2.14 trillion ($13.5 billion), based on a comparison of Bank of Japan current account data and money broker forecasts. The bank expected its current account to fall ¥2.74 trillion due to fiscal factors including government bond issuance and tax payments on Wednesday, much bigger than a drop of about ¥600 billion estimated by Central Tanshi Co. and Ueda Yagi Tanshi. The yen strengthened sharply by as much as 0.9% to 157.38 per dollar on Friday after producer prices data in the US. The move came after a suspected intervention on Thursday night, when the government likely spent $22 billion to prop up the yen following weaker-than-expected US inflation data. The suspected second intervention, if confirmed, would be a fresh example of the government conducting a follow-up move after a larger-scale operation to keep traders on alert. Bloomberg analysis of the central bank’s current account and money broker estimates earlier indicated that a two-punch operation occurred in late April and early May. Japanese finance ministry data showed a follow-up intervention took place in October 2022. Link: https://lnkd.in/eQiyNmQt My take: The BoJ spent over $35 billion last week intervening to prop up the yen. Why? Because as yen slides, inflation pressures in Japan build and that would force them to hike rates which will send shockwaves across global bond markets. Stay tuned, this is getting interesting. Will macro traders break the BoJ like Soros once broke the BoE? Doubt it but you never know! Technical note: It’s up to the Ministry of Finance to intervene and it uses the BoJ as its agent to do so . The BoJ acts on intervention.

China Goes Big, and Market (Initially) Gives it the Benefit of the Doubt: Overview: News of China's multifaceted support measures have bolstered risk appetites today. The dollar is mostly softer and only the yen and Swiss franc among the G10 currencies have been unable to find traction against the greenback. Most emerging market currencies are also trading with a firmer bias. China's measures include measures to support the stock and housing markets. The seven-day repo rate was cut by 20 bp (to 1.50%) and reserve requirements were cut by 0.5%.  China's CSI 300 rallied 4.3% and an index of mainland companies that trade in Hong Kong jumped over 5%. It helped spur an equity rally not only in the region, but Europe's Stoxx 600 is up almost 0.6% and US index futures are trading higher. Yields in the Asia Pacific were softer, and the Reserve Bank of Australia's hold seemed a little less hawkish than previously. However, European benchmark 10-year yields are mostly 2-4 bp higher, but the Gilt yield is up six basis points to almost 4%. The 10-year US Treasury yield is four basis points higher near 3.80%. Gold is steady after setting a record high near $2940 today. China's stimulus appeared to lend crude oil support. November WTI is up about 2.5% today and it is pushing above $72 a barrel for the first time since September 3.  Asia Pacific The sharply lower dollar fix by the PBOC last Friday was an important signal. Yesterday, the PBOC gave the market another signal with a 10 bp cut in the 14-day reverse repo rate. Today, it went big. It cut reserve requirements by 0.50% (freeing up CNY1 trillion or $142 bln) and cut the 7-day repo rate by 20 bp (to 1.5%). The PBOC also announced CNY800 bln support for the stock market (CNY500 bln swap facility and a CNY300 bln re-lending facility. This could later be scaled up, if needed. The central bank also indicated that it was considering a state-backed stabilization fund, which it has used in the past (2015). There were also new measures to support the housing market. The PBOC increased the backstop for local governments buying houses from 60% to 100% and cut the minimum down payment for second home purchases.  As widely expected, the Reserve Bank of Australia stood pat and reiterated that it is too early still to reduce rates. Governor Bullock indicated that unlike the last meeting, there was not discussion to cut rates, and this saw the Australian dollar unwind early gains. Still, the central bank does not expect the 2-3% inflation target to be reached until 2026. The market shaved the chances of a rate cut, which in the futures market is hovering slightly above 50%. Australia's 2–3-year yields were off 10-11 bp. Tomorrow's release of the August monthly CPI print (median forecast in Bloomberg's survey is at 2.7%, vs 3.5% in July). Japanese markets reopened from the long-holiday weekend. There are two developments to note. First, the… http://dlvr.it/TDckDd

The Bank of Japan is forecast to keep its interest rate settings unchanged Friday, with the yen’s plunge this week to a fresh 34-year low making it more likely the bank will tone down its stance on keeping policy easy. https://lnkd.in/gkZi2MqC The spotlight on Governor Kazuo Ueda will be more intense than usual as currency officials have intensified warnings to traders over the yen, and with business executives increasingly vocal about their currency concerns. Market players will scrutinize the policy statement, the quarterly economic outlook and Ueda’s remarks for hawkish signals, and for anything new on bond purchase plans. “This meeting is to examine the impact of the shift in the policy framework in March,” said Mari Iwashita, chief market economist at Daiwa Securities. “Given the weak yen and elevated oil prices, there is a chance for upside risks to intensify for inflation.” The yen fell through the key threshold of 155 to the dollar this week, the weakest level since 1990, keeping currency traders on high alert for the possibility of government intervention. Japan’s top currency officials have indicated frustration over the yen’s continued slide even after the BOJ’s first rate hike since 2007 last month.

BOJ to Hold Rates With Focus on Hawkish Signals to Buoy Yen. (23/4/2024)   (Bloomberg) -- The Bank of Japan is widely expected to leave its benchmark interest rate unchanged Friday, with investors focusing on any hints of a less dovish tilt as the yen trades around a 34-year low. Governor Kazuo Ueda and his fellow board members are set to keep the short-term rate around 0% to 0.1% at the end of their two-day policy meeting, after the central bank called time on its massive monetary easing program last month, according to all but one of 53 surveyed economists. Just five weeks since that monumental shift, Ueda faces the challenge of striking a delicate balance between putting a floor under the yen while also supporting a fragile economic recovery. The yen surprised Japanese authorities by retreating even after Japan conducted its first rate hike since 2007. The weak currency could spur cost-push inflation, and some executives at businesses that benefited from the depreciation of the currency have started to express concerns about the overall impact. That has sharpened the focus of market players on whether the bank might send a clearer signal of policy normalization this time around. “The risk is rising for a front-loading of a rate hike in June or July,” said Ryutaro Kono, chief Japan economist at BNP Paribas SA. “The yen is likely to keep falling gradually,” as the government views intervention as insufficient to shift the tide in light of strong US economic data and escalating geopolitical risks in the Middle East, he said. The BOJ’s latest quarterly inflation forecasts and its characterization of the risks to its view are among the easiest ways the central bank could flick at the possibility of earlier rate hikes. Other potential areas include its bond-buying plans and the language the central bank uses to describe its purchases, according to some market watchers. Read more: Bond Traders on Tenterhooks for Any Signal From BOJ on Purchases Governor Ueda hasn’t ruled out responding to exchange rates with a policy move if the impact on prices is seen to be “non-negligible.” The yen fell to 154.85 versus the dollar overnight, the weakest level since June 1990. Traders are on high alert over the possibility Japanese officials might step back into the market to buy the nation’s currency, as they last did in 2022. For now BOJ policy is continuing to weigh on the yen. Ueda has emphasized that he expects financial conditions to stay easy to ensure there’s no disruption to markets or the economic recovery stemming from the BOJ’s policy pivot. That message may have permeated markets too strongly, analysts say. (continue..)

https://lnkd.in/g7RmjrmA The USD is flat, oil prices are steady, while equity markets and US yields are mixed amid US & UK bank holidays. Currency markets are contained within tight trading ranges with the absence of both the... #piifx #paymentsinternational

With the Rupee testing a series of lows, it becomes crucial for the RBI to rely on aggressive FX intervention to restrain the exchange rate volatility. In the RBI bulletin of January 2025, the authors talk about buying/selling a currency in the forex market to manipulate the exchange rate of that currency against other foreign currencies. A fine example is the USD/INR buy/sell swaps during the 2013 Taper Tantrums. We see this happening in EMEs/developing countries- India, China, Japan. These interventions follow a ‘lean against the wind’ strategy- a case of tight monetary policy where RBI steps in to stabilise large swings in the Rupee. Let’s consider the BoJ in this scenario- An appreciation of the Yen will prompt the bank to buy US Dollars against Yen in the forex market. This is done through issuing financing bills (FBs). Contrary, when FX intervention is conducted by selling US Dollars against a large depreciation of the Yen, US Dollar funds are used to buy Yen. We have the spot and forward markets but interventions generally take place in the former to benefit from the T+2 settlement (more liquidity). RBI’s forex reserves have dipped from a peak of $705bn in Sept odd to $625 bn in Jan. A stock is said to have a deep market if it has high volume trades with a small spread (bid price - ask price). While, a security has a thin market if the trading volume is low with a wide spread. Even though India’s FX market has mostly been deep, it has become shallow during GFC, Covid, Yen-carry trade and so on.

*** 20 big figure move in USDJPY*** Yen carry trade has its history in Alan Greenspan’s rate cuts in 1998. It’s gotten bigger since. Few weeks ago, Bank of Japan (BoJ) sold $100bn at USDJPY 160. If the BoJ buys back USD now it will make them *Greatest FX trader* in history 😄 To understand the upsizing of the Yen carry trade, one must look back to Alan Greenspan's Fed and the events of 1998. Fed Chair Alan Greenspan implemented three consecutive rate cuts from September to November 1998, amidst (carry) Yen unwinds, citing concerns over rising credit spreads and *financial stability*, even though the U.S. economy didn’t necessarily need the cuts at that time. The emergency rate cut during the 1998 yen carry unwind was strongly bullish for U.S. assets, catalyzing the dot-com boom, which lasted until it burst in 2000. This marked the beginning of an increase in yen carry trades as traders realized that the U.S. Fed—and, by extension, other central banks—would support the trade. As a result, Yen carry trades grew larger. It remains to be seen if Chair Powell will take a different approach. The "Yen carry trade" has expanded significantly since 2007-08, with current estimates putting its size at around $4 trillion, four times larger than then. The impact of the yen carry trade in 2007-08 is often underreported, with China’s current account surplus receiving much of the blame. Japan’s role, as a U.S. ally, was either deliberately overlooked or misunderstood. For those who do not use leverage and are not vulnerable to margin calls, there are now great long-term opportunities in U.S. assets. U.S. assets are likely to recover, and the carry trade will probably make a comeback. The world will continue to move forward. “What do you think? Tell me in the comments Do you have any alternate views or explanations? I'm curious to hear your thoughts. Thanks ! #BOJ #carrytrade #yencarrytrade #nikkei #japan #bankofjapan #AlanGreenspan #dotcom #2008creditcrisis #1998crisis

https://lnkd.in/giFWrPJZ The USD eases, oil prices are weak, equity markets are up, and US yields are mixed as rates continue to take center stage. The USD eases in early trading but... #piifx #paymentsinternational

Private Equity & Investment Transactions Update 31st July, 2024. INVESTORS REACT TO BOJ'S INTEREST RATE HIKE “The Bank of Japan said on Wednesday it is raising its short-term interest rate to 0.25% and will gradually reduce the amount of bonds it is buying under its quantitative easing programme... ...At the end of its two-day policy meeting, the central bank said the decision to raise its policy rate was unanimous and the amount of bonds it buys per month will fall to 3 trillion yen ($19.65 billion), half the current rough target, by early 2026.” Observation: Several investors have casted their perspective on the same. It was rumoured that early this month, the currency regulators in Japan intervened in the currency trade by purchasing yen. Investors will be able to confirm the nation's market moves later on Wednesday when the Ministry of Finance releases its monthly report on yen interventions. The majority of experts believed that the BOJ would rather to postpone until it was certain that private consumption would rebound before raising interest rates in July. https://lnkd.in/g-NWgn_4 Source: Reuters