I started this thread as a place where you can ask any questions about intervention or discuss it in detail.
Knoxville jc 14:36:52 GMT - 03/18/2011
Sorry for the dumb question, but when the Fed sells JPY for USD, where do they get the massive amounts of JPY to sell?
New Haven CT RR 14:50:54 GMT - 03/18/2011
How does the BOJ intervene? Does it just print yen to sell and buy dollars in exchange and then buy Treasuries?
GVI Forex Jay 16:51:03 GMT - 03/18/2011
jr, no question is considered dumb.
The Fed has swaps lines with the Bank of Japan. When it buys dollars and sells yen for intervention, it swaps the dollars with the Bank of Japan for yen. So in the end the Bank of Japan supplies the yen.
The alternative would be to sell yen out of reserves but more likely it is being done on behalf of the Bank of Japan and thus swap lines are used.
I hope that is clear.
GVI Forex john 17:06:25 GMT - 03/18/2011
RR- The BOJ is selling JPY which they have printed for USD. In the past, they usually they have "sterilized" their intervention. That means they sell Japanese bonds to absorb the excess JPY. Intervention works best when it is unsterilized. In any case they have to do something with those billions of USD, and so they buy U.S. Treasuries.
Hope this is not too technical...
GVI Forex Jay 17:53:07 GMT - 03/18/2011
I posted this earlier on GVI Forex It is important to understand as this is why the spot market often moves when one currency pair is trapped in a tight range and crosses move.
GVI Forex Jay 11:55 GMT March 18, 2011
Cross Trading 101: Reply
USD/JPY has struggled moving higher so for jpy to weaken on its crosses, offsets have to take over and push the dollar lower elsewhere, which is what has occurred.
I assume this is not what the G7 had in mind when it agreed to joint intervention.
GVI Forex Jay 10:33:34 GMT - 03/25/2011
Note how the BOJ putting a floor under USD/JPY has given the market a green light to sell JPY on its crosses for a carry trade.
As posted on the Forex Forum today:
London Mick 10:25 GMT March 25, 2011
EUR and JPY: Reply
All the BoJ has to do is hold the line until after March when seasonal pressures will end and make it easier to put a floor under usdjpy.
London ex 10:22 GMT March 25, 2011
EUR and JPY: Reply
Looks like there is some USDJPY demand today. I have to assume that Tokyo is in behind the scenes giving it a lift. Can't really trade USDJPY with Japan putting in a solid floor but market flows seemingly going the other way.
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