Asian "Currency Defense" continues to upgrade: 1.2 trillion US dollars can not save the yen?

As the US dollar fell against non -US currency on Monday (September 12), the US dollar continued to rise against the yen, and more and more investors in the foreign exchange market were starting to put their attention under the measures of Japanese decision makers.

Because this is likely to determine whether the "currency defense war" launched in the background of the US dollar appreciation during the year will enter the new "chapter" ...

Should intervention: Japan revisit the past in the Asian financial crisis in 1998

Japan's last intervention in the exchange market to support the local currency exchange rate was in 1998, when most Asian economies were impacted by the financial crisis. Today, although, including Japan, the Asian region is far from the danger of being in a financial crisis, at least in the foreign exchange market, the trend of the sharp depreciation of currencies in Asia in Asia is enough to evoke people more than 20 years ago. Duan Chen's history of history!

Since the beginning of this year, the trend of the yen's exchange rate against the US dollar has almost never stopped. As of last weekend, the yen's exchange rate against the US dollar had fallen by more than 20%during the year, and the decline not only exceeded the G10 currency such as the euro and the pound, but also far exceeded the currency of Asian emerging markets such as the Dalogen, the Indian rupee, and the Thai baht.

This has made more and more people in the industry began to expect that the distance between Japan's decision -making layer once again intervene in the foreign exchange market may have only one step left.

Japanese cabinet official house deputy chief official Muhara Kihashi said in a TV show on Sunday that Japan must take necessary measures and pay close attention to the excessive and unilateral changes in the exchange rate.

Last Friday, after meeting with Japanese Prime Minister Kishida Wenxiong, the Governor of the Bank of Japan had issued a strong warning to the devaluation of the yen so far. Kuroda Dongyan said that he was unwilling to see the rapid depreciation of the yen, which increased the uncertainty of corporate operations. Subsequently, the yen exchange rate was stabilized on the same day.

On Tuesday, the latest trading of the US dollar against the yen is near 142.60. The current attention of traders is: whether the currency pair will rise to the 145 mark. Last week, the US dollar touched 144.99 against the yen, which was not far from the level before the 1998 Nikko joint intervention in the exchange market to support the Japanese yen -146.78.

Heated discussions in the industry: Can not save the yen at 1.2 trillion US dollars?

For Japanese decision makers, compared with the last intervention in the foreign exchange market to support the yen, the Japanese foreign exchange reserve ammunition is undoubtedly more sufficient. However, the outside world still believes that without the support of the United States, unilateral intervention in Japan is unlikely to succeed easily.

If the Japanese government chooses a separate action to defend the weakened Japanese yen, a major helper will be a foreign exchange reserve accumulated since 1998. Its growth rate has significantly exceeded the growth rate of the trading volume of the local currency market -as of 8 as of 8 At the end of the month, Japan had US $ 1.17 trillion foreign currency reserves, while the average daily yen trading volume in the Tokyo market was about $ 479 billion. The ratio of the two is currently 2.4 times, and 1.4 times in April 1998.

However, past experience shows that despite the larger foreign reserves, the support of the United States is still crucial to whether the intervention of the Japanese government can work. In 1998, the Japanese government intervened when the Asian financial crisis was approaching the end to boost the yen.

In April of that year, the Japanese government spent about US $ 21 billion without the support of the United States, and then barely supported the yen in the month, which was almost equivalent to about 10%of the Japanese foreign exchange reserves at that time. Since then, when the United States and Japan decided to take coordinated operations in June of that year, Japan spent only 2.5 billion US dollars, which was almost zero when acting alone.

Therefore, some economists say that the decision -making layer of Japan may still be unwilling to interfere with the market easily, especially with the support of the United States, because they will worry about this move that may be counterproductive, but will cause a lot of short -short bets.

In view of Japan's G7 agreement that has previously joined the G7 promised to make the market decide on the exchange rate, the Japanese government will need to see the Japanese yen further to prove the rationality of its actions. In the case of its separate intervention in the foreign exchange market, the best situation may only be temporarily cracking down on speculators and obtaining an asthma for the yen, but it is still difficult to change the big trend.

In fact, when the speculators, including Soros in 1992, short pounds, the British exchange market intervention could not even set up much water. This sounds the alarm for the decision -making layer of Japan: when it is basically not good at facing you, there is limit to market confrontation.

Harumi Taguchi, chief economist of S & P Global Market Intelligence Company, said, "In fact, I don't think that Japan will intervene. The biggest reason behind the weak yen is the continuous interest rate hike of the Fed. Unless this situation changes, I don't think Intervention will have an impact. "

At present, the United States obviously does not support Japan's intervention. As asked about whether the U.S. Treasury Ministry of Finance spokesman Michael Gwin said since the US Finance spokesman said, "There are currently no supplementary content since the US Finance spokesman."

US Treasury Secretary Yellen said in July that member states of the Seven -Power Groups such as Japan and the United States should allow the market to decide the exchange rate of their domestic currencies. Only in rare and special circumstances can we interfere with the foreign exchange market.

"The United States will not support Japan's intervention," Masaaki Kanno, chief economist of Sony Financial Group, pointed out. "The United States is satisfied with the strong US dollar because it helps eliminate some inflation pressure. The central bank refuses to do so, because of lack of sustainable inflation, Japan is actually making cocoons. "

It is worth mentioning that not only will Japan be facing the distress of whether to interfere with the foreign exchange market to stabilize the Japanese yen. The political and economic decision makers in Asia are facing the test of the "currency defense war" upgrade under the threat of a strong US dollar.

Data from Standard Chartered Bank shows that an indicator of the adequacy of foreign exchange reserves that have received close attention from the emerging market (excluding China)-a country can use its foreign exchange reserves to pay for how many months of imports can be paid. It has fallen to the lowest level since the global financial crisis in 2008.

You know, the number at the beginning of this year is about 10 months, and it has been as high as 16 months in August 2020, which shows that the "ammunition" reserves that defending their currencies in Asian countries are gradually exhausted. According to the data from Standard Chartered Bank, the current foreign exchange reserves can meet India's nine months of import demand. Indonesia is six months, the Philippines is about eight months, and South Korea is seven months.

Divya Devesh, the head of Standard Chartered Bank in Singapore and South Asian Foreign Exchange Research, said last week, "The deterioration of the situation shows that the intervention made by central banks in the future may be more limited to support the local currency. In general, we expect that foreign exchange policies of central banks from various countries will change It is no longer so supportive. "

Another institutional data also shows that Thailand's foreign exchange reserves accounted for the largest decline in the proportion of GDP (GDP), followed by Malaysia and India, which indicates that they are one of the largest countries in the exchange of Hui City during the year. The scale of foreign exchange reserves in India and Thailand this year decreased by about $ 81 billion and $ 32 billion, respectively. South Korea's foreign exchange reserves decreased by $ 27 billion, Indonesia decreased by $ 13 billion, and Malaysia decreased by $ 9 billion.

Analysts pointed out that as the Fed's radical tightening policy stimulates more funds to return to the United States, the Central Bank of Asian Economy has relying on foreign exchange reserves to protect their currencies from appreciation of the US dollar. Any signs of the slowdown in the exchange market's intervention may further exacerbate the depreciation of Asian currencies. Many Asian currencies have recently touched records or many years.

Vishnu Vorathan, the economic and strategic director of Ruisui Bank in Singapore, said, "From the current speed of burning money, Thailand is still worrying. Dangerous. "

In addition to Japan, many Asian economies have recently strengthened the control of the foreign exchange market. India's President Shaktcanta Das said that the agency is monitoring the currency market almost every day, and the Central Bank of Korea also stated that it will take positive measures to stabilize the exchange rate of the Korean won.

"They are in a dilemma," Varaathan said. "" The US dollar stronger, the risk of economic recession, and inflation that intensified due to the impact of exogenous price -the common role of these factors means that the central bank of Asia's emerging market can not take it for granted that the worst is the most serious. The risk has passed. "

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