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G-7 and BoJ Attack the Yen


Several of the most powerful central banks in the world, including the Federal Reserve, the European Central Bank, and the Bank of Japan, have begun a co-ordinated intervention to weaken the rising Yen in the wake of the terrible natural disaster that struck Japan on March 11, 2011, and the possible pending danger of a nuclear catastrophe as a result of the quake and tsunami that took out the cooling systems in several nuclear reactors.

On March 11, we stated, perhaps a bit prematurely, that it was time to sell JPY, as there was a strong confluence of factors that pointed to the JPY strength being unsustainable over the medium to long term. Those who were able to withstand the upward spike in JPY, or better yet, those who got in during the spike, are quite possibly in for a nice ride - the G-7 cannot allow this intervention to fail - it would be disastrous for financial markets everywhere, not to mention the G-7's credibility. Setting our sights on the 100.00 level in USD/JPY would appear reasonable over the next 1-2 years, as real rates in the US move up at the end of QE2, and then as the Fed begins to raise its benchmark rate in late 2011 or early 2012. The Bank of Japan on the other hand, is not likely to raise rates at any point in the foreseeable future.

<< Time for EUR to Re-Visit Reality Time to Sell Yen >>

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