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Author Topic: What does it mean when a "country intervenes in the currency market"?  (Read 3882 times)
sidhujag
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October 15, 2014, 02:02:54 AM
 #41

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
NO its a race to bottom its a currency war...
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October 16, 2014, 12:18:52 AM
 #42

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
NO its a race to bottom its a currency war...

It is a race no country can win.


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sidhujag
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October 16, 2014, 05:00:27 PM
 #43

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
NO its a race to bottom its a currency war...

It is a race no country can win.

The one with the biggest/smartest military will win. For now.
scarsbergholden
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October 18, 2014, 11:36:36 AM
 #44

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

sidhujag
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October 18, 2014, 10:59:56 PM
 #45

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

well boj has caused usdjpy to bottom out... and eurchf is holding above 1.2 for years now... getting pretty cose but I agree... however with jpy i think they will enter a period of inflation (maybe hyper inflation) because of what they did.. i think instead of jpy being so strong it will become super weak because of the choices they made.. there is no happy between now.. they went to extreme measures to do major interventions and now rate is climbing but it will either fall back down or go through the roof to hurt their economy again.
BTCmoons
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October 19, 2014, 03:33:51 AM
 #46

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

well boj has caused usdjpy to bottom out... and eurchf is holding above 1.2 for years now... getting pretty cose but I agree... however with jpy i think they will enter a period of inflation (maybe hyper inflation) because of what they did.. i think instead of jpy being so strong it will become super weak because of the choices they made.. there is no happy between now.. they went to extreme measures to do major interventions and now rate is climbing but it will either fall back down or go through the roof to hurt their economy again.
Japan has been going through a period of deflation for over a decade now. They are in dire need of inflation. The Japanese government has purchased hundreds of billions of dollars (if not trillions of dollars) over the past 10+ years but the yen still appreciated against the dollar from trading at ~120 yen per dollar to less then ~80 yen per dollar
sidhujag
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October 19, 2014, 07:16:23 AM
 #47

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

well boj has caused usdjpy to bottom out... and eurchf is holding above 1.2 for years now... getting pretty cose but I agree... however with jpy i think they will enter a period of inflation (maybe hyper inflation) because of what they did.. i think instead of jpy being so strong it will become super weak because of the choices they made.. there is no happy between now.. they went to extreme measures to do major interventions and now rate is climbing but it will either fall back down or go through the roof to hurt their economy again.
Japan has been going through a period of deflation for over a decade now. They are in dire need of inflation. The Japanese government has purchased hundreds of billions of dollars (if not trillions of dollars) over the past 10+ years but the yen still appreciated against the dollar from trading at ~120 yen per dollar to less then ~80 yen per dollar
Preach it to the choir. Like I havent seen a chart? They messed up by signing the plaza accord. Now they are backtracking and made mistakes by intervening... that is the essence of the convo not dire need for inflation... they get more inflation than they can handle

btw your number are off they didnt buy hundreds of billions of dollars.. that is a lie. Give me a link.
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October 19, 2014, 03:00:04 PM
 #48

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

well boj has caused usdjpy to bottom out... and eurchf is holding above 1.2 for years now... getting pretty cose but I agree... however with jpy i think they will enter a period of inflation (maybe hyper inflation) because of what they did.. i think instead of jpy being so strong it will become super weak because of the choices they made.. there is no happy between now.. they went to extreme measures to do major interventions and now rate is climbing but it will either fall back down or go through the roof to hurt their economy again.
Japan has been going through a period of deflation for over a decade now. They are in dire need of inflation. The Japanese government has purchased hundreds of billions of dollars (if not trillions of dollars) over the past 10+ years but the yen still appreciated against the dollar from trading at ~120 yen per dollar to less then ~80 yen per dollar
Preach it to the choir. Like I havent seen a chart? They messed up by signing the plaza accord. Now they are backtracking and made mistakes by intervening... that is the essence of the convo not dire need for inflation... they get more inflation than they can handle

btw your number are off they didnt buy hundreds of billions of dollars.. that is a lie. Give me a link.
The amount of intervention are probably understated. In October 2011 the JCB (japan central bank) purchased ~$100 billion of dollars to weaken the yen in one day and purchased ~$20 billion of dollars in early November 2011.

Source: http://www.reuters.com/article/2012/06/01/us-japan-economy-azumi-idUSBRE85003L20120601
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BOJ UNDER PRESSURE AGAIN

Tokyo spent a record 8 trillion yen ($101 billion) in unilateral intervention into the currency market last October 31, when the dollar hit its record low against the yen, and another 1 trillion yen in early November on undeclared forays into the market. Authorities have stayed out of the market since then.
I would say that if they spent that much over the course of a few weeks then it would be easy to assume that they purchased a trillion dollars over the course of a decade.
sidhujag
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October 20, 2014, 02:31:02 AM
 #49

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
Most will still follow a hands-off policy. When a currency market is intervened in, the impact is almost always temporary as intervention only slows the appreciation of the currency not reverses it over the long term.

well boj has caused usdjpy to bottom out... and eurchf is holding above 1.2 for years now... getting pretty cose but I agree... however with jpy i think they will enter a period of inflation (maybe hyper inflation) because of what they did.. i think instead of jpy being so strong it will become super weak because of the choices they made.. there is no happy between now.. they went to extreme measures to do major interventions and now rate is climbing but it will either fall back down or go through the roof to hurt their economy again.
Japan has been going through a period of deflation for over a decade now. They are in dire need of inflation. The Japanese government has purchased hundreds of billions of dollars (if not trillions of dollars) over the past 10+ years but the yen still appreciated against the dollar from trading at ~120 yen per dollar to less then ~80 yen per dollar
Preach it to the choir. Like I havent seen a chart? They messed up by signing the plaza accord. Now they are backtracking and made mistakes by intervening... that is the essence of the convo not dire need for inflation... they get more inflation than they can handle

btw your number are off they didnt buy hundreds of billions of dollars.. that is a lie. Give me a link.
The amount of intervention are probably understated. In October 2011 the JCB (japan central bank) purchased ~$100 billion of dollars to weaken the yen in one day and purchased ~$20 billion of dollars in early November 2011.

Source: http://www.reuters.com/article/2012/06/01/us-japan-economy-azumi-idUSBRE85003L20120601
Quote
BOJ UNDER PRESSURE AGAIN

Tokyo spent a record 8 trillion yen ($101 billion) in unilateral intervention into the currency market last October 31, when the dollar hit its record low against the yen, and another 1 trillion yen in early November on undeclared forays into the market. Authorities have stayed out of the market since then.
I would say that if they spent that much over the course of a few weeks then it would be easy to assume that they purchased a trillion dollars over the course of a decade.

Judging by the fact that there is only $1.3 Trillion USD in circulation I hardly think that is the truth. The intervention that was big $101 billion was the one shot and th ebig one.. but normally around japan open they openly sold a few million on the open market.. but it doesnt add up to much compared to the big intervention.
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October 20, 2014, 05:21:51 AM
 #50

Judging by the fact that there is only $1.3 Trillion USD in circulation I hardly think that is the truth. The intervention that was big $101 billion was the one shot and th ebig one.. but normally around japan open they openly sold a few million on the open market.. but it doesnt add up to much compared to the big intervention.
You need to remember that the majority of US dollars available are not in "hard currency/paper" form but rather is in "digital" form. You also need to remember that trillions of dollars worth of dollars are traded every day throughout the world.

Take the stock market for example, there are close to hundreds of billions of dollars worth of stocks traded on a daily basis however none of it actually has physical cash change hands.

IIRC the amount of dollars traded on forex markets is in the trillions of dollars per day, however I am having trouble finding a source on this
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October 20, 2014, 05:46:03 AM
 #51

Judging by the fact that there is only $1.3 Trillion USD in circulation I hardly think that is the truth. The intervention that was big $101 billion was the one shot and th ebig one.. but normally around japan open they openly sold a few million on the open market.. but it doesnt add up to much compared to the big intervention.
You need to remember that the majority of US dollars available are not in "hard currency/paper" form but rather is in "digital" form. You also need to remember that trillions of dollars worth of dollars are traded every day throughout the world.

Take the stock market for example, there are close to hundreds of billions of dollars worth of stocks traded on a daily basis however none of it actually has physical cash change hands.

IIRC the amount of dollars traded on forex markets is in the trillions of dollars per day, however I am having trouble finding a source on this
Its $5 trillion a day from derivatives etc.. yea alot of those are IOUs on margin.

I doubt boj works on margin..
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October 23, 2014, 03:51:43 PM
 #52

Not all countries have a "weak local currency" currency policy. Some will let the currency freely float against other currencies regardless of what the market does. The only currencies that will have the problem of being too strong are countries that have net exports as their currency will naturally get stronger as they sell products overseas, bring the profits home and buy the local currency.

The problem is what happens when other countries manipulate the foreign currency exchange rate. Do they still follow an off-hands policy or do they intervene in the market?
NO its a race to bottom its a currency war...

It is a race no country can win.

It's obvious there are going to be wars to "solve this". When countrie are on economical dead ends, wars are manufactured. This massive debt has no happy ending.
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