Japan's intervention captures all the attention
International Trading
THE TECHNIQUE OF GIVING A GOOD MASSAGE
14 years ago
Saturday, September 18, 2010
, Posted by Usman Ali Minhas at 1:04 PM
Despite the lack of economic data from Asia this week, but the market witnessed the first intervention since 2004 after the Japan sold its currency after reaching a 15-year high against the dollar, which is threatening the nation's recovery.
Before Japan's intervention, the yen recorded the highest at 82.91 against the dollar, while the finance minister Yoshihiko Noda noted that areas of 82 for the pair are the line of defense; the yen has failed so far to breach and reach 82.00 levels. Heavy fluctuations along with instability in the markets signaled that the yen's advance was to continue towards testing 82 areas.
Japanese exporters are suffering from the yen's appreciation, which has a negative effect on overseas sales; gains in the Japanese currency versus the dollar and other majors reduces Japanese companies' annual operating profits for tycoons such as Toyota, Panasonic and Sony, noting that these companies are the largest exporters in Japan.
The Japanese government interventions in the currency market is not expected to change the direction of the currency over long term basis unless Japan finds support from its European and American counterparts. Also it is not expected that the government can lead the yen to the levels that meet Japanese companies' earnings.
As for the Reserve Bank of New Zealand, it preserved the benchmark interest rate unchanged at 3.0% for the second consecutive month, as the economic recovery slowed amid rising global downside pressures and also preemptively after the nation suffered the worst earthquake in 80-years, which pushed the RBNZ into withholding and accommodative policy.
New Zealand's government indicated that the natural disaster that struck the country adds downside pressures on the economy; accordingly, curbing near-term economic growth and the drop in consumer spending reduced inflationary threats.
Governor Bollard raised the cash rate from a record low 2.5% in June, which was the first increase in three years, while he expected to gradually withdraw stimulus as exports buoy recovery and inflation pressures build.
Meanwhile, the RBNZ announced that reconstruction will start to help the economy grow by the fourth quarter of this year, and may add as much as 1 percentage point to annual average growth in the year ending March 31, 2012.
Governor Bollard is going to keep annualized inflation in a secure area between 1% and 3% as the economy grows, whereas he expects that consumer price index will increase by 4.8% during the year ending June 30, 2011, from 1.8% a year earlier.
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