(Kitco News) - Japanese intervention in dollar/yen so far Monday has been “massive,” says BNP Paribas. The effort to halt yen strength pushed the dollar sharply higher. Estimates suggest that the intervention “will easily surpass the previous single-day record” of 4.5 trillion of yen intervention set in August, BNP says. Still, the recent expansion of the “intervention war chest” means that any limit to action “remains a distant prospect,” BNP says. Japan’s Ministry of Finance cited the one-sidedness and speculative elements of recent yen strength as the motive. BNP suggests one explanation for timing of the Japanese action may be concern that a dovish Federal Open Market Committee meeting this week might be enough to trigger further downside in dollar/yen, making Monday’s intervention “an attempt to guide the pair away from the danger area in advance.” Further, the bank notes a Group of 20 meeting is set for later this week, with Europe’s debt issues one of the topics. With Japan “making encouraging noises” about further investment in Europe, Japanese officials may feel that other nations would “acquiesce to a weaker yen in exchange for Japanese support for Europe,” BNP says.
By Allen Sykora of Kitco News; asykora@kitco.com
AI
