First, a look at what got us here.
Thursday US time:
- Japan intervened in the forex market - report
Asia, Friday morning:
- ICYMI - the new angle Japan is taking on yen intervention
- Japan's Kanda says recent yen moves are somewhat rapid
- USD/JPY smashed lower, back under 158.50 - Another round of JPY intervention
- USD/JPY wild swings continue, back above 159.30
No sooner than I hit publish on that final post the thing made a liar out of me and plunged back to 158.20 and under.
The Bank of Japan have been active. Nikkei reports on a round of 'rate checks' (explanation of this below if you need) in EUR/JPY.
A "rate check". This is when the Bank of Japan contacts FX dealers at banks and asks for a dealing level in USD/JPY (EUR/JPY apparently in this case). Dealers quote the Bank a two-way price, a bid, and an offer. This is a bit of a charade as everyone knows what's going on, the BOJ is intervening by making a threat of intervention. While this is going on dealers will contact other banks and sell USD/JPY (and EUR/JPY in this case) heavily, in effect 'front running' the BOJ. This is what the BOJ wants to happen, it's a form of intervention without buying any yen and selling USD from reserves, EUR in this case. The next step is actual BOJ USD/JPY (EUR/JPY) selling.
