Serious qn - What's stopping USDJPY trading to 170 or 200?

pinetboltz said:
ok not to be facetious here, but given USDJPY has remained relatively strong above the 150 level (occasional lil smashes that smacks of desperation notwithstanding, kind of like a random hedge fund whale perhaps getting caught offside and trying to conveniently pass it off as "intervention") - what's stopping it from trading to 170 or 200?
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Other than the BOJ doing massive intervention every time it gets above 150? Nothing. But you'd have to be a full on idiot to battle the BOJ in size. They can easily hold that line forever.

The way to play this situation isn't with forex. You short the JGBs. BOJ will hold the line at 150 until rates rise, at which point the carry trade unwinds and you collect the profits on the bonds, denominated in Yen. Then convert the yen back into dollars for bonus profits at a lower usd/jpy exchange rate.
 
Velarcus said:
Other than the BOJ doing massive intervention every time it gets above 150? Nothing. But you'd have to be a full on idiot to battle the BOJ in size. They can easily hold that line forever....
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Can they, really?

See George Soros and the BOE.
 
Velarcus said:
The BOE wasn't doing infinite quantitative easing. The BOJ is. So yeah, they can.
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Right, they've been doing QT for decades and look at what UJ has been doing and all the other majors Yen pairs the past 2, 3, 4 years.
 
SunTrader said:
Right, they've been doing QT for decades and look at what UJ has been doing and all the other majors Yen pairs the past 2, 3, 4 years.
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I assume you meant QE, but whatever...

The difference is, 150 is the line in the sand that they drew. Nobody here does fundamental analysis, so it probably looks like just another big figure to you, but it is not. There are macro factors inside Japan that the BOJ has to consider when making policy. Inflation inside Japan is now material. The next move will be to abandon yield curve control. They have no choice. And they don't even need to pull the trigger on that to crush your JPY shorts. Hints of a move are enough to cause massive repatriation flows.

You are playing with fire.
 
Velarcus said:
I assume you meant QE, but whatever...

The difference is, 150 is the line in the sand that they drew. Nobody here does fundamental analysis, so it probably looks like just another big figure to you, but it is not. There are macro factors inside Japan that the BOJ has to consider when making policy. Inflation inside Japan is now material. The next move will be to abandon yield curve control. They have no choice. And they don't even need to pull the trigger on that to crush your JPY shorts. Hints of a move are enough to cause massive repatriation flows.

You are playing with fire.
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Yup QE. But what is so magically about 150, don't pay no mind to BRN's.

Last two big reversals took place @ in mid 140's in 1998 and 160 in 1990. As well as 177 support from 1978 breaking in 1986

I do agree if BOJ abandons yield control with multiple (3 or more) rate increases, currency could strengthen. But then if that happened FED would be likely to keep high rates longer as well as even increase them more negating much Yen strength.
 
SunTrader said:
Yup QE. But what is so magically about 150, don't pay no mind to BRN's.
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Japanese inflation is running >3%. A further slide in the Yen will drive that even higher. After nearly three decades of deflation there are a ton of zombie companies with mountains of debt. Yield curve control is the only thing keeping them alive. Higher inflation from a weaker currency will force the BOJ to hike faster/farther then they would prefer, and kill most of those zombie firms, causing widespread unemployment and political instability.

YCC will end soon. The BOJ is just holding out as long as possible to allow the zombies to extend duration. When they finally do move you are going to see a massive unwind in the carry trade and the Yen is going to become materially stronger.
 
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