First, let’s look at how we got here.
Thursday US time:
Asia, Friday morning:
As soon as I published my last post I was branded a liar and it plummeted again to below 158.20.
The Bank of Japan has been active, with the Nikkei newspaper reporting a series of “interest rate checks” (explained below where appropriate) on EUR/JPY.
“Rate Check”. This is when the BOJ contacts the bank’s FX dealer and asks what the trading level of USD/JPY (obviously EUR/JPY in this case) is. The dealer gives the BOJ a two-way price, bid and offer. This is a bit of a farce as everyone knows what’s going on. The BOJ intervenes by threatening to intervene. While this is happening, the dealer contacts other banks and sells a lot of USD/JPY (EUR/JPY in this case), effectively “pre-empting” the BOJ. This is what the BOJ wants, a form of intervention where they sell USD from their reserves (EUR in this case) without buying Yen. The next step is for the BOJ to actually sell USD/JPY (EUR/JPY).
