BOJ Intervention or De Ja Vous? - 1st November, Currency Market Update

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by: fxsolutions
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Date: Wed, 9 Nov 2011 Time: 9:52 AM
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Neil Looker, Market Strategist at FX Solutions (http://www.fxsolutions.com/), provides Forex traders with an overview of currency market activity and news on 1st November 2011, including news around the BOJ.

"Last week the BOJ announced it was expanding its asset purchase programme by JPY 5trillion to JPY 55 trillion but the market apparently viewed this as insufficient to weaken the JPY so when the CME's International Monetary Market released its figures at the close of business on Friday that the non commercial long JPY positions has risen to levels close to levels where the BOJ had last intervened in August it was just the ‘ speculative market ‘ that the Japanese Finance Minister had warned he would punish last week.

I am quite surprised myself as I thought the BOJ would wait until after the FOMC meeting where a discussion on QE3 in the US is likely to be mentioned along with this week's G20 summit and the US jobs data as the last thing the BOJ will want to see is history repeating itself when they intervened in huge size in August only to see the fundamentals turn against them and the JPY level return to where they stepped in just 3 days earlier.

Today's intervention commenced around 10.30am Tokyo time and within the usual time frame for the BOJ to act ( just after the fix ) bids were seen in the market for around $1.5 billion at a time and once 79.20 was achieved the bids were replenished at this level every time leading the Asian market to believe that the BOJ were going to establish a SNB type floor the JPY, but as Europe walked into a 4% rally this theory diminished as Japans global trading partners make this type of action impossible to carry out.

The volume of the action taken by the BOJ is still not known but the market are looking to take them on as we slide lower all day just breaking through 78.00. The BOJ really have to continue to come to the market or they will lose credibility and the fact they are acting alone gives the market confidence so a move above 80.25 is most certainly needed or the JPY strength will continue."

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