What prompts Japan to intervene in the Forex market? A new ...

USDJPY sees most violent single day rally in over 20 years

Saxo Bank
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Forex Reserves – India must now put its massive forex reserves to better use

forex reserves
During the week, India’s forex reserves crossed the psychological $500 billion mark. India has come a long way from having just 15 days of imports as forex reserves in 1991 when she had to pledge gold to the Bank of England. Now there is a problem of plenty!
Forex reserves ranking
For the first time since the forex chest began to be recorded, India entered the top-5 in terms of forex reserves. India ranks behind China, Japan, Switzerland and Russia and has overtaken Taiwan, Hong Kong and Saudi Arabia. KSA, at one point of time held over $750 billion in its forex reserves but 5 years of weak oil prices meant that Saudi Arabia has been forced to draw heavily on its forex reserves despite cutting down on many of its welfare outlays. India can hope to overtake Russia soon. China leads the rankings with $3.5 trillion in reserves.
Why are reserves building up?
There are multiple reasons why the forex reserves are building up. Firstly, the sharp fall in oil import bill has brought down the trade deficit by more than 50% on a monthly basis. Secondly, the forex remittances from NRIs have been extremely robust with most of the world markets offering either zero or negative rates of returns. Lastly, RBI intervention in the forex markets has reduced substantially and that has also helped forex reserves build-up.
Know more: http://blog.tradeplusonline.com/stock-market-updates/forex-reserves-india-must-now-put-its-massive-forex-reserves-to-better-use/
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Drone Strikes Are Escalating a Geopolitical Crisis—Which Could Help the Dollar

Investors rushing back to risk assets this month just got a reminder of the kind of simmering geopolitical threats out there. That could be good news for the dollar.
The drone strike on one of the world’s biggest oil facilities over the weekend raises the specter of escalating tensions across the Middle East — exactly the kind of scenario that typically fuels demand for assets denominated in the world’s reserve currency.
“Any retaliatory measures by Saudi Arabia would inevitably lead to an increased geopolitical risk scenario, i.e. the demand for safe-haven currencies can be expected to remain buoyant,” wrote Marc-André Fongern, strategist at MAF Global Forex. “From a fundamental perspective, there is still hardly any alternative to the dollar.”
Throw in still-festering trade tensions, record policy uncertainty, weak growth in Europe — with no fiscal stimulus in sight — and the continued outperformance of American markets, and the stage may be set for a new phase of greenback strength if the bulls have it right.
Even after a September pullback, the dollar is the best performing G-10 currency this quarter, and the Bloomberg Dollar Spot Index remains close to levels notched two years ago. The latter gained 0.3% at 10:19 a.m. in New York on Monday as the drone strike in Saudi Arabia rippled through markets.
The latest flow data underscore the kind of support the exchange rate is enjoying from global investors these days. Numbers from EPFR Global Data released last week show cash was piling into stocks amid the global bond sell-off, but beneath the surface it all headed one way: American equity funds attracted more than $17 billion in the week through Sept. 11. Shares in Europe, Japan and the emerging markets all recorded outflows.

Trade War

As the trade war drags on, haven demand for the U.S. currency is likely to continue, according to Ned Rumpeltin, the European head of G-10 currency strategy at Toronto Dominion Bank. He points out there have been several false dawns in the protectionist spat, and says it’ll be no surprise if that happens again.
“The dollar remains the best house in a very bad neighborhood,” he said. “There are few places in the G-10 where the dollar can underperform.”
Analysis from JPMorgan Chase& Co. and Goldman Sachs Group Inc. shows the dollar is getting a lift from weakness in developing nations spurred by fears of a slowdown in China.
Absent a significant pick-up in risk appetite that diminishes the dollar’s flight-to-quality credentials, even fresh U.S. monetary easing would struggle to materially undercut the currency, according to Jane Foley, Rabobank’s head of currency strategy.

Bear Hunt

There remains plenty of ammo for dollar bears. The U.S. has twin deficits and the greenback is the most expensive G-10 currency based on the Bank for International Settlement’s real effective exchange rate.
One of the biggest bulls — HSBC Holdings Plc — acknowledges risks are rising to its strong-dollar call issued in April 2018. In a recent note, it stress-tested the potential impact of three scenarios: fiscal stimulus outside America, thawing trade relations, and U.S. intervention to weaken the currency. They all pose “serious negative consequences” for the greenback, HSBC said.
But nominal rate differentials matter in a world where more than $13 trillion of bonds globally yield below zero.
Around 60 trillion yen ($560 billion) Japanese government bonds with a coupon of over 1% will mature within three years and that money is likely to be reinvested in U.S. bonds where the whole curve is still positive, said Naoya Oshikubo, a senior economist at Sumitomo Mitsui Trust Asset Management. The company is one of the managers of Japan’s Government Pension Investment Fund, the world’s largest.
“The dollar will be well supported because of these flows,” Oshikubo said.
Japanese investors bought 2.47 trillion yen of U.S. government bonds in July, the most since 2016, according to the latest data.
“The dollar is still ticking a lot of boxes for a currency to be long: high liquidity, high security, high yield. Its economic situation still better than others,” said Andreas Koenig, head of global foreign exchange at Amundi Asset Management. “It’s difficult to find attractive alternatives.”

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U.S. Intervention in Venezuela is needed and could benefit both countries.

Although the U.S. does have a track record of hurting South American Countries (e.g. Puerto Rico and Panama) they are too often portrayed as the ultimate bad guy. In reality the U.S. government comes down and tries to "save the day" by instilling their values on other nations. U.S. private firms will then try to be part of the solution which if allowed will monopolies many markets. The key words being "if allowed", U.S. corporations often dominate in these third world countries because they have unfair advantages (vasts amount of capital, better technology, etc.) which at the end of the day can be great for an economy. Rarely is trade between two countries bad for either country, yes it hurts the small businesses in the smaller country but the people now have access to better and cheaper goods. Sometimes these interventions lead to countries being too reliant on their trading partner and thus hurting themselves, this case occurs when corruption and misallocation of funds runs rampant (e.g.corruption in Puerto Rico). I argue that the corruption that Venezuela faces today is exclusive to the "Chavistas" and not a good representation of the Venezuelan people.

The other side to U.S. intervention allows for countries to flourish because U.S. Investors are able to jump start the economy. Examples of this are obvious when you look at European countries that were under Nazi Control. The example that I like to point out is that of South Korea, which thanks to U.S. military and financial intervention was able to have a booming economy which today rivals Japan. This occurred because although U.S. firms tried to take control of South Korean assets the South Korean government didn't allow for it, thus receiving aid while at the same time prioritizing their own growth above paying back the U.S.. I believe that Venezuela would take this sort of approach.

The Idea of the U.S. getting involved in Venezuela isn't something that I like and had this happened back in 2002 during the (almost successful) military coup against Hugo Chavez I would have been against U.S. intervention 100%. However Venezuela today is in such a crisis (economic and humanitarian) that U.S. intervention is a necessary evil. Food relief for the people and pegging the Bolivar with the Dollar could help the country move forward (recent example of this being Eritrea who is now posed with great potential).

Eventually the Venezuelan people will overthrow Maduro on their own and will be able to elect their own president (as they tried in 2012 with candidate Henrique Capriles) but that doesn't seem to be the case today and waiting for this to happen will cost lives that could have been saved.

submitted by sergio0713 to unpopularopinion [link] [comments]

Interest rates going negative

The Bank of Japan is the latest to adopt negative interest rates. The Swiss and the ECB have already done so.
Negative interest rates on bonds means investors pay to own government (and corporate) bonds, instead of getting paid interest.
Clearly deflation is more of a risk to investors than inflation.
Thus we can fund a basic income with created money, or with deficit spending. T-bills are the gold of the modern world financial system; they are used as collateral in trades. Repo trades have experienced negative interest rates before because traders need to show they have T-bills as collateral before someone will loan them much more money than they pay for the privilege of borrowing the T-bill for a day. T-bills are too scarce, because of misguided, misinformed balanced-budget hysteria.
Conclusion: the fears about government deficits and money creation are silly. We should fund a basic income through 1) money creation 2) deficit spending. Taxation is better than nothing, but we must seriously examine the first two options as better.
Edit: From a USA Today article:
The Bank of Japan on Friday introduced a negative interest rate policy, a move aimed at boosting a stumbling economic recovery and warding off deflation. Markets jumped on the intervention.
Remember that Japan's debt-to-GDP ratio is approaching 250%. Reagan proved deficits don't matter; Japan learned the lesson. They should fund a basic income with their central bank.
Edit 2: Note also, Japan's money supply has been steadily increasing, from about 10.5 trillion in Yen, in 2009, to 12.5 trillion in 2015. Edit 3: sorry that's 1.05 quadrillion Yen in 2009 increasing to 1.23 quadrillion Yen in 2015. An increase of $1.5 trillion. $1.5 trillion / 127 million Japanese = $11k/person over that 6-year period. But that money supply measure doesn't count most of shadow banking, I warrant. Increase the money supply more for a basic income. Have all the world's central banks open swap lines freely so that they can mitigate any currency exchange risk. The private sector already uses forex instruments and swaps to eliminate forex risk.
Inflation has remained steadily low since the mid-1980s.
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Holy shit! Swiss National Bank intervenes via FOREX markets, targets rate at 1.20

This is a huge move in FOREX terms http://i.imgur.com/NL6kL.png
(Reuters) - The Swiss National Bank said on Tuesday it would set a minimum exchange rate target of 1.20 francs to the euro and would enforce it by buying foreign currency in unlimited quantities.
Following are analysts' comments on the move.
"Dollayen has moved higher in a knee-jerk reaction, in line with a rise in risky assets in the wake of the SNB's move.
"That may come down to an expectation that we're going to see global policymakers reciprocate . and that this may represent the leading edge of a stronger response. But I think that those expectations are misplaced.
"What Swiss policymakers are doing won't be a concern to Japanese policymakers. I think that any expectation that this is a leading indicator for Japanese policy is misplaced.
"It's not to say we don't anticipate additional easing by the Bank of Japan . But that's a function of the domestic economy, it's not a function of what people are doing elsewhere."
Edit: adding comments from article:
"That was the single largest foreign exchange move I have ever seen. The Swiss franc has lost close on 9 percent in the past 15 minutes. This dwarfs moves seen post Lehman brothers, 7/7, and other major geo-political events in the past decade.
"The Swiss have had enough and have said today that they are willing to buy foreign currencies in 'unlimited amounts'. This is intervention on a grand scale.
"This turns up the heat on the euro zone and other economies who have benefited from weakening their currency in the past couple of years."
submitted by StockJock-e to investing [link] [comments]

If Trump wins, chances of Mexico government intervention on USD.MXN?

Japan's government is prepared for an intervention, and they're not even the most affected. What are the chances of Mexico's government intervening?
If Trump wins and Mexico's government intervenes, what would they do exactly? Is it safe to say that the end result would be "stolen" profits for traders long USD.MXN?
submitted by lelease to Forex [link] [comments]

Swiss bank intervention, what does it mean?

If you woke up to find the FOREX market on chaos, welcome to Tuesday!
The Swiss stepped up, devaluing their currency to keep up with the rest of the planet in the race to the bottom.
ZeroHedge sums it up nicely:
A few other points to make:
1) Big Swiss exporters like Novartis and Nestle are dancing a jig right now as this will surely boost their sales in the short-term. Also, banks in Switzerland and Austria who had heavy exposure to Eastern Europe are breathing a sigh of relief right now.
You see, Swiss interest rates have traditionally been lower than in Europe’s emerging economies. For example, many Hungarians took out mortgage loans in Swiss francs because the borrowing rate was so much cheaper.
Once the Swiss franc began to rise, however, borrowers had a difficult time paying back the loan; suddenly their mortgage payment and balance were much higher than before, and default rates soared.
Banks in Austria, Germany, and Switzerland who wrote most of the loans were sitting on huge potential losses… and this destruction to the financial system has been mitigated thanks to today’s move. I have to imagine this had some influence in the decision.
2) For all the talk of a pullback in gold, this is only further reason for a rise in precious metals. It’s true that nothing goes up (or down) in a straight line, but given that the world just lost nearly its last remaining safe haven currency, there are few other asset classes to turn to.
3) Markets are not functioning properly. Competitive devaluation means that governments are all striving to out-print each other… Europe is printing as much as they can to bail out the PIIGS, Switzerland just signed up to join then, Japan and China are not far behind, and QE3 is set to launch soon in America.
With so much money sloshing around the financial system, there is absolutely no sense of value anymore; people cannot invest with confidence given all the massive bureaucratic intervention.
4) In the Swiss National Bank’s brief statement, they said “With immediate effect, [the SNB] will no longer tolerate a EUCHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.”
The three key words here are ‘WITH IMMEDIATE EFFECT’. This is just another example of a government making instant changes that pose dramatic risk over people’s lives and livelihoods.
Make no mistake, we can all wake up tomorrow to a new reality.
submitted by StockJock-e to thestockmarket [link] [comments]

Trading CHF With Possible SNB Intervention? FOREX AUDUSD: RBA cut 25 bp, G7 is coordinated intervention coming ? Price Action, 03.03.2020 126: A Trader's Introduction to the Japanese Yen, Part III World Amazing Modern Technology Road ... - YouTube Central Bank Intervention - The Historical Effects on Currency Markets Inside North Korea's One Star Airline - YouTube 10 Most Amazing Mega Projects Of Dubai - YouTube How Africa is Becoming China's China - YouTube The Foreign Exchange Market- Macro 6.3 - YouTube IMF urges Korea to limit foreign exchange intervention

Japan has a history of currency intervention, selling heavily in the early 2000s to weaken the yen. It did so again after the 2008 financial crisis and most recently after the 2011 earthquake and ... In Japan, the Foreign Exchange Fund Special Account (FEFSA), which falls under the jurisdiction of the MOF, is used for foreign exchange intervention. For example, when foreign exchange intervention is conducted by buying U.S. dollars against yen in the foreign exchange market in response to a sharp rise (appreciation) of the yen, the yen funds to be sold are raised by issuing financing bills ... Japan has stuck to global agreements against competitive devaluation; its most recent formal intervention in the forex market happened after the devastating Fukushima earthquake and nuclear crisis ... March 2004 - The end of a 15-month campaign to curb the yen’s rise in which Japan spend a total of 35 trillion yen, or more than $300 billion, on intervention. May-June, 2002 - Bank of Japan ... Japan forex intervention. 07.06.2017 Aksar 5 Comments . Being on a U. Treasury Department watchlist doesn't limit Japan's currency policy, Aso insists. TOKYO -- Japanese Finance Minister Taro Aso may have been venting frustration with Forex when he overtly mentioned the option of forex in to halt the yen's rise, but market watchers have seen through his talk to the difficulty of such a step ... Japanese Yen strength may fuel speculation that the Bank of Japan could intervene. Amid slowing global growth, a cheaper Yen may do little to support exports while risking trade tensions. This paper estimates and analyzes the reaction function of Japanese intervention in the foreign exchange (Forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. A theoretical friction model is adopted to describe the intervention as cost-minimizing behavior. An ordered probit model, consistent with the theoretical model, is employed to estimate ... Japan tried some verbal intervention earlier today and it didn't do much at first but it's likely responsible for the reversal today, if not outright intervention. The MOF Forex Division gives the BOJ Forex Division specific directions for the intervention, and the BOJ Forex Division executes it. The BOJ Forex Division continues to monitor market developments in parallel with the intervention and provides the MOF Forex Division with market information, such as market reactions to the intervention. There are some cases where the method of intervention is ... NEW YORK (Forex News Now) – In a major move that has not been attempted in six years, the Japanese government today opted to intervene in the global forex trading markets and attempt to devalue the yen against the dollar. The Bank of Japan announced the initiative to spend almost $20 billion to reportedly purchase dollars at 83 yen in an effort to drop the value of the yen against the dollar ...

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Trading CHF With Possible SNB Intervention?

In this video I explain the market for foreign exchange and national currencies. If you want more practice, check out the Ultimate Review Packet for FREE: ht... Nick McDonald of Trade With Precision takes a historical look at central bank intervention in the currency markets and the likely effects of the 2010 selling of Yen by the Japanese government. This video shows you inside North Korea and their one star airline; Air Koryo. (only one star airline in the world by Skytrax rating) You get an idea what's ... Hi Traders, RBA 25 bp cut, awaiting G7 statement, is coordinated intervention coming ? If yes, then when ? Full Top down AUDUSD analysis... Check the video for more details Copy and Trade with ... Below is a graph provided by Dailyfx.com which shows some of the history of Japanese intervention, which as you can see tends to take place around the 100 level in the currency. As the BOJ has ... By now the vast majority of the world knows that Dubai is the city of modern architecture. Just like the Eifel Tower represents a beautiful love letter to 19... Start learning with Brilliant for free at http://Brilliant.org/WendoverThe first 200 to sign up for a premium account with that link will also get 20% off.Check... World Amazing Modern Technology Road Construction Machines Biggest Heavy Equipment Machinery in Action Subscribe : https://goo.gl/ULXMwU Thanks You! With the SNB's history, we always need to keep the possiblity of FX intervention in mind for the CHF. ---- We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts ... IMF "한국 환율 개입, 과도한 변동성 완화 수준으로 제한해야" The International Monetary Fund has once again urged Korea to limit its intervention in the foreign exchange market.