FX intervention 30/09

[laziz314159]

Quote from m22au:

Thanks for your ideas Laz, but I must admit that I didn't understand ....

"Trying to stave off Soros' 'reflexivity' is funny, in an existential sense. "

From Soros' book 'The Alchemy of Finance'.. He basically looks for self-reinforcing cycles which he calls 'reflexivity', and is essentially a feedback loop.

...For a long time the dollar got stronger because of foreign investor inflows to purchase stocks, and in turn the rates of return on those stocks got 'juiced' by the currency differential, which made the stocks even more attractive and brought in more foreign investors, ad infinitum.

Now that the end of dollar hegemony is on the horizon (at least from a macro standpoint) it's going to be very hard to work the dollar down and save the stock market at the same time. You need growth. But growth from devaluation takes awhile, and pisses off our major trading partners (ex: china) who hold lots of t-bonds that they can sell off and tank the dollar, which done too quickly is not growth-enhancing. It will all end badly.

Regards,
laz

 

[m22au]

Brilliant explanation ... thanks.

It will be fun - months and years down the track - watching the Chinese and Japanese dumping their bonds en masse - will make for interesting viewing.

Quote from laziz314159:



From Soros' book 'The Alchemy of Finance'.. He basically looks for self-reinforcing cycles which he calls 'reflexivity', and is essentially a feedback loop.

...For a long time the dollar got stronger because of foreign investor inflows to purchase stocks, and in turn the rates of return on those stocks got 'juiced' by the currency differential, which made the stocks even more attractive and brought in more foreign investors, ad infinitum.

Now that the end of dollar hegemony is on the horizon (at least from a macro standpoint) it's going to be very hard to work the dollar down and save the stock market at the same time. You need growth. But growth from devaluation takes awhile, and pisses off our major trading partners (ex: china) who hold lots of t-bonds that they can sell off and tank the dollar, which done too quickly is not growth-enhancing. It will all end badly.

Regards,
laz

 

[trader556]

pasting the whole article just in case it dissappears down the road..



Reuters
Dlr spikes vs yen in New York on MoF intervention
Tuesday September 30, 10:58 am ET


NEW YORK, Sept 30 (Reuters) - The dollar spiked back higher against the yen on Tuesday, and the Japanese Finance Ministry said it had intervened in the market via the U.S. Federal Reserve.
Some New York-based analysts earlier cited suspicions of yen-weakening intervention and talk that the New York Federal Reserve may have been buying dollars for yen as reasons for the jump in the U.S. currency.


Shortly after 10:30 a.m. EDT (1430 GMT), the dollar jumped higher against the yen, to 110.90 yen from around 110.30 yen.

A New York Federal Reserve official declined comment when asked whether the New York Fed was involved in currency market intervention. It is standard procedure for the New York Fed to decline comment on such matters. But Japan's Ministry of Finance later confirmed it had intervened via the Fed.

The European Central Bank also said it had no comment on reports of central bank intervention in foreign exchange markets.

"The New York Fed buying dollars ... that has been the talk in the market.. But I don't know if it's true," said Marc Chandler, currency strategist with HSBC in New York.

 

[CPTrader]

If you are a dollar bull, this can't be positive, an intervention and yet not much.....

Quote from m22au:

I'm not sure if that was directed at me ..... but for the record I am a US Dollar bear

The comment was not directed at anyone... I was just thinking aloud. I know there is a lot of bashing and petty fighting on this site, but I don't engage in that. Let's just spread ideas, teach one another, and learn from one another.

 

[Cutten]

My view is that this is the sort of intervention you want to fade. The Japanese are fighting against the long-term trend in both price and fundamentals, as well as trying to go against the US administration's weak dollar policy. I'd be looking to accumulate long-term positions in the Yen, adding on the dips following BoJ interventions.