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USD/JPY hit a 13 year low of 88.22 today after news that the bailout plan is not going happen before the new year. If you have been following my blog, I called for a move down to a new 13 year low Wednesday morning. At that time, USD/JPY was trading at 92.50-93.00. The currency pair has reversed violently after falling to 88.22.
Will the Bank of Japan Intervene?
A big question on everyone’s mind is Will the Bank of Japan intervene. Don’t expect BoJ intervention to happen anytime soon. As an export dependent nation, a strong currency is not in Japan’s best interest. However unlike in the past where the BoJ has intervened when USD/JPY fell below 105 and 100, we may not see any action by the Japanese government this time around. Since the problems are inherent in the US and the Eurozone, intervening at this time may be counterproductive for the Japanese. The only type of intervention that has ever worked is coordinated intervention. The BoJ will have a very tough time convincing the Americans to take any steps that would lead to further strength in the US dollar. The Japanese government needs to stand aside and allow the US and Eurozone governments to take their measures to spur growth and not strengthen the dollar for their own short term relief.
USD/JPY Chart from 12.10.08