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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (4754)	1/11/2004 10:19:07 AM
From: Wyätt Gwyön	Respond to of 110194

``It continues to feel as if there's only one dollar buyer in the market and that's the BOJ,'' i am curious what effect this has on other currencies. obviously the BOJ/MOF are obsessed with JPY/USD. they sell yen, creating USD buying pressure. according to the well-known argument, this buying pressure props up the USD. so the theory is that USD should be much lower against everything were it not for the actions of the BOJ/MOF. but commensurate with USD buying pressure is JPY selling pressure. does this selling pressure have an effect on anything other than JPY/USD? i think it does. i think it props up the EUR and other currencies as well. so perhaps a let-up would cause a yen rally against EVERYTHING (not just USD). now we have had the "perfect storm" for dollar depreciation--negative short rates compared to higher short rates elsewhere; combined with buying pressure from BOJ/MOF. the thing about a perfect storm is that it reaches a point where it can only get less perfect. this implies that the effects of the storm "output" could change, perhaps nonlinearly, as the environmental "input" factors change. the obvious inputs are a change in MOF/BOJ's behavior on the one hand; and a narrowing of the short-rate delta between USD and the EUR/Anglo currencies. there may be others as well. but whether the perfect storm ends soon, or with EUR at $1.50 and GBP at $2.25 and JPY at 80 i do not know.