Analysts in the shadow of a strong dollar: intervention alone is impossible to reverse the yen’s decline!Provider Finance Association

Analysts in the shadow of a strong dollar: intervention alone is impossible to reverse the yen’s decline!

Financial Associated Press, October 17 (Editor Zhou Ziyi) Under the strong dollar, currencies of various countries are facing the impact of soaring, especially the Japanese yen. As the dollar approaches 150 once morest the yen, Daisaku Ueno, chief foreign exchange strategist at Mitsubishi UFJ-Morgan Stanley Securities, noted that “it is impossible to reverse the yen’s decline through intervention alone.”

It hovered around 148.60 in early Tokyo trade on Monday, although it was down from Friday’s high of 148.86, it was still at an all-time high.

For now, the 150 level will be a key psychological level, and traders are watching closely to see if the Japanese government may intervene once more.

Japanese authorities intervened in the foreign exchange market to buy yen on September 22, the first time Japan has bought yen since 1998. The yen is now down regarding 2 percent from where it was at the time of the latest intervention.

Furthermore, Daisaku said, “Once the yen falls below 150, it is difficult to predict where its depreciation will stop.”

Joint intervention does not appear to be coming

At last week’s meeting of G20 finance ministers and central bankers in Washington, there was no sign that countries would reach a joint intervention like the 1985 Plaza Accord.

In 1985, the dollar saw an unusual surge, prompting France, Japan, the United Kingdom, the United States and what was then the Federal Republic of Germany to join forces to weaken the dollar in an effort to reduce the U.S. trade deficit. The agreement was named the “Plaza Agreement”. In the ensuing 12 months, the dollar lost regarding 25% of its value.

It’s just that the 1985 agreement was reached on the premise that the United States deliberately contributed to the devaluation of the dollar.

And when U.S. Treasury Secretary Janet Yellen was asked last week whether there was a “Plaza 2.0” agreement, she made it clear that Washington had no intention of taking such a joint action, saying the overall strength of the dollar was “a natural consequence of the different pace of monetary tightening in the U.S. and elsewhere.” “.

Since U.S. authorities have no intention of brokering such a deal, other countries will have to do their own thing to try to ease the pain of a stronger dollar.

Japanese Finance Minister Shunichi Suzuki also acknowledged that despite the grievances once morest the United States, there are no plans for coordinated intervention.

“Take decisive action at any time”

Japanese policymakers generally believe that they will closely monitor the yen’s volatility and the speed of its decline to decide whether to intervene, so the focus is not on the level of the yen.

Suzuki said on Monday that the authorities would take decisive measures to curb excessive currency fluctuations if necessary. He also noted that Japan is constantly monitoring exchange rate movements with a sense of urgency.

Japanese Deputy Finance Minister Masato Kanda said on Friday that authorities were ready to “take decisive action at any time” if the yen continued to fluctuate excessively.

Finance ministers from the Group of Seven (G7) nations also said in a statement last week that they would closely monitor “near-term volatility” in markets, following a major push from Japan.