US Dollar / Japanese
Real-time - 01/18 07:27:06 am

Capital flight

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04/11/2013 | 12:02 pm
Opinion : Bullish above 96.65 
Target price : 102.1 
Investors go away from the Japanese archipelago after the last meeting of the central bank of Japan (BoJ) which marks a break with the previous policy now giving priority to a massive increase in the money supply.

The institution indicated that it plans to double its monetary base, that is to say the money it creates, in only two years, which will lead to a significant rise in money supply and consequently in the consumption in Japan.

To achieve this goal, the central bank will accelerate its asset purchases, now including 40-year government bonds, at a rate of 60,000 to 70,000 billion yens per year, diluting the value of the money. The BoJ hopes to reach the new inflation target at 2% within the next 24 months.

As a result, Japanese bond yields and the yen are down, prompting investors to switch to new assets offering better outlooks, in the United States or in Europe, amplifying the decline in the Japanese currency. The beginning of a new fiscal year on the archipelago, ideal for a review of investment strategies, also amplifies the vicious circle.

International leaders do not seem to care that the greenback rose by more than seven figures against the yen in only one week. Indeed, Christine Lagarde, the IMF boss, has welcomed the new monetary policy of the third largest economic power in the world, which she considers as a support for the worldwide growth.

Graphically, the USD/JPY is approaching the JPY 100 psychological level where many sales orders and options positions converge. We take some of our profit, aiming a possibility of strengthen our position at JPY 98.25 even 96.65, to continue to benefit from an historical long term opportunity which may propels the greenback towards JPY 102.10 then 104.90 in the coming months.
Mathieu Burbau 2019
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