Friday, 30 March 2012

Collapse of the yen

This is what Chris Martenson said would happen in his interview last week

-- The Yen is collapsing and Japanese government bonds will go right with it. We have posted several stories showing that Japan will wind up spending 100% of its revenue just to pay the interest on its debt. That will leave nothing, especially for Fukushima and Reactor 2, which is now unapproachable. We told you this would happen this way over the last year, at Collapsenet. We did it in great detail with the help of our own "Rice Farmer" who lives there. -- MCR

Yen Slides As Bank of Japan Policy Speculation Hits Fever Pitch
The yen weakened broadly Tuesday, as traders reacted to speculation of more monetary easing from Japan that could further erode the currency's value.

27 March, 2012

Since early February when the Bank of Japan surprised markets by expanding its bond-buying efforts, the yen has been locked in a weakening trend. Although the currency normally benefits from a March 31 deadline in Japan that prompts Japanese exporters to repatriate their foreign currency, the deterioration in Japan's trade position and the BoJ's efforts to revive the country's growth have counteracted some of those flows.

Against that backdrop, the yen fell sharply amid unconfirmed talk that Japan's central bank could unleash new quantitative easing efforts. That momentarily took the spotlight off Monday's remarks from Federal Reserve Chairman Ben Bernanke, who weakened the dollar broadly after stating the Fed's own policies would remain accommodative in the medium-term.

In early U.S. trading, the dollar bought Y83.18, about a full yen shy of last week's 11-month high and up 0.43% from Monday's close. The euro changed hands around Y110.80, up 0.14% from the previous U.S. session.

"There has been a lot of interest in the last week or so buying dollar/yen," said Ron Leven, currency strategist at Morgan Stanley in New York. Although many market participants say Japan's fundamentals bode for a weaker currency, Leven says expectations for a weaker yen might be premature.

"Markets are over-aggressively interpreting how [accommodative] the BoJ will be," Leven said. "As the Fed starts exiting quantitative easing…and rates start moving higher, the incentive to hold dollars will rise. But we're not there yet."

Meanwhile, the dollar staged a recovery from Monday's sell-off that sent the Dollar Index swooning to a three-week low. Traders focused on a speech by the Fed chief, in which he cast doubt on how sustainable the recovery in U.S. employment really was. The remarks fanned expectations that a new round of massive bond-buying, which customarily weakens the dollar, was in the offing.

"If that is something that's going to happen later this year, it bodes for dollar weakness," said John Doyle, director of markets at Tempus Consulting. "People were expecting [Bernanke] to be a bit more bullish than he was…and the dollar is unable to build momentum."

As the impact from Bernanke's comments retreated to the background, the euro fell 0.19% against the dollar to trade near $1.3331, and the dollar firmed by 0.15% against the Swiss franc to trade near CHF0.9044. The Australian dollar fell 0.47% to change hands around 1.0483.

A clutch of better-than-expected U.S. data was modestly helpful to market sentiment. Standard & Poor's Case-Shiller data showed U.S. home prices fell in January, but separate consumer confidence figures showed consumers remain confident about the economy and labor markets.

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