22 Dec 2014
Yen outlook makes sense - BBH
FXStreet (Guatemala) - The analyst team at Brown Brothers Harriman explained the G7/G20 will not strongly resist the weaker yen, despite the references to currency wars in the media.
Key Quotes:
“The fact that Japanese producers do not appear to be seeking market share by weakening the yen, and seem largely content to accept the boost in profitability coming from translation of foreign earnings helps deter a protectionist backlash”.
“Japanese officials are more likely to temper the pace of the yen’s decline through verbal intervention, especially ahead of important international meetings and/or around key psychological chart points, like JPY125 and JPY130”.
“The risk of outright material intervention seems slight, but there is precedent for it. Japanese officials intervened to prevent yen declines from Q2 1991 to Q3 1992, and in Q4 1997 and Q2 1998. In most cases, USD/JPY moved at around 125-130”.
“The real effective exchange rate for the yen dropped to the historical low on September 2014”.
Key Quotes:
“The fact that Japanese producers do not appear to be seeking market share by weakening the yen, and seem largely content to accept the boost in profitability coming from translation of foreign earnings helps deter a protectionist backlash”.
“Japanese officials are more likely to temper the pace of the yen’s decline through verbal intervention, especially ahead of important international meetings and/or around key psychological chart points, like JPY125 and JPY130”.
“The risk of outright material intervention seems slight, but there is precedent for it. Japanese officials intervened to prevent yen declines from Q2 1991 to Q3 1992, and in Q4 1997 and Q2 1998. In most cases, USD/JPY moved at around 125-130”.
“The real effective exchange rate for the yen dropped to the historical low on September 2014”.