A news report suggesting the Bank of Japan is mulling easing up on large-scale currency market intervention at the end of March sent the dollar sliding sharply early Monday afternoon. But it quickly rebounded on what traders suspected was heavy official buying by Japan's central bank, which acts on behalf of Japan's Ministry of Finance in foreign exchange markets. In a report in its Tuesday edition, The Nikkei Financial Daily cited "some central bank officials" as expecting to end the recent heavy bouts of dollar buying, with the belief that upward pressure on the yen would abate by itself.
While the report was dismissed by some market participants as too speculative, it had the effect of pushing the dollar down over a yen to a two-week low of Y109.25. The selling pressure hurt the dollar across the board, though the yen's move was much stronger. The report also sparked a rapid sell-off in the U.S. Treasury market, the typical beneficiary of the dollars Japan buys via intervention. However, the selloff was short-lived, with traders citing heavy dollar buying by Japanese agent banks, most likely for the BOJ. "Apparently, they haven't stopped at all," said a dealer at a Japanese bank in New York. "They're still buying."
A foreign-exchange strategist at Bank of America in New York, said Japanese authorities may just be testing the waters for an eventual pullback. "The report is speculative in itself," said the strategist. "If the BOJ was looking to test the waters to see what stepping out of the market might do, you saw a quick reaction just based on this report." She said the currency markets already believe that the BOJ would eventually have to ease up on its record-breaking pace of intervention, most likely after Japan's fiscal year ends this month.
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that came via email from my broker
I can not find the link
Mish |
