Roxi_117 wrote a note · Apr 13, 2024 20:54

The mystery of the dollar and yen on the night of 4/12

Even though the dollar index (yellow) rose due to dollar purchases from currencies other than the US, US bonds were bought at the same time, and interest rates (purple) on US10Y declined. Nevertheless, the dollar-yen exchange rate (green) remained stable. I was surprised that it was different from usual. At the moment when a slight phase difference occurred and the dollar-yen exchange rate began to fall, it seemed that the FX team woke up, and the dollar yen plummeted. After that, it vibrated a few times, and then gradually returned to normal.

I saw Pan's YouTube broadcast on the morning of the 13th the next day for this strange phenomenon, and I was able to understand that the cause was Q geopolitical headline risk.

https://youtu.be/dYe4O9QHddg?si=BtJwj0LaGyuw07hG

No, is it more serious? Maybe it's not just a headline risk? Why isn't Japanese mass media reporting properly?

https://www.youtube.com/live/IQaOsp-QkDw?si=16QkT05fcnBo4OHv

==Just an Idea==

This strange phenomenon of the current dollar-yen exchange rate can probably be applied to the method of exchange intervention? : For example,

The Japanese government is recruiting exchange defense FX team members from Japanese citizens who hold FX accounts. If you become an exchange defense FX member, you will be able to receive information such as execution plans and execution times of the government's exchange intervention operations on the MooMoo app, LINE, etc.

The Japanese government slowly buys dollars in Japanese yen, which can be inexhaustively issued by the Bank of Japan, and then slowly buys US bonds in sync immediately to reduce the Japan-US market interest rate difference (US10Y-JP10Y).

In this process, the speed and phase of the buy operation synchronization are controlled to cause subtle fluctuations in the market price. Exchange defense FX members who have obtained operation information from the Japanese government will short sell dollars all at once with full leverage. With this, the dollar-yen exchange rate will begin to decline.

In the first half of the exchange defense strategy, the Bank of Japan puts a large amount of dollar index prices on the selling board, and even if others buy market dollars, it maintains a state where it is difficult for the yen to depreciate.

In the latter half of the exchange defense strategy, the Bank of Japan moves a large amount of dollar index prices from the selling board to the buying board, and maintains a state where it is difficult to return to a strong dollar even if dollar repayment purchases are made.

At the end of the exchange defense operation, the Bank of Japan will collect a large amount of dollars from the board and return it to the foreign exchange reserve account, and then leave it to a completely free exchange market.

If such a thing can be done, it may be possible to defend the exchange rate using domestic currency, which can be issued virtually inexhaustively, while keeping the wear and tear of valuable cash, dollars, and foreign currency, which is only 136.1 billion dollars (about 19 trillion yen) to the Japanese government.

Self-Defense FX members who participate in exchange defense operations will generate large amounts of profit. Since about 20% of that can be taxed, the government uses this as a source of capital for consumption tax cuts.

The general public will be freed from the pain of import price inflation and consumption tax hikes. Then, wage increases can be used for consumption and investment, and the domestic economy improves. If that happens, labor cost increases will spread to small to medium enterprises, and the so-called “virtuous cycle of wages and prices” will become established.

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Reference article US10Y to 5%?

https://news.yahoo.co.jp/expert/articles/57410cb840f12cc58920d2f953783cb0ed23d614

If this happens, all domestic price increases will be absorbed by inflationary exporters, so it will be difficult to continuously raise domestic wages.

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The Japanese government's foreign exchange reserves

Japan's foreign exchange reserves are 1,292 billion dollars (about 180 trillion yen). Over 1 trillion dollars of this amount is held in securities centered on US bonds. Cash dollars that can be used for exchange intervention are only 136.1 billion dollars (about 19 trillion yen) as deposits to overseas central banks, banks for international settlements (BIS), etc. They say they are worried about not being able to easily intervene in the exchange rate.

Source: Nihon Keizai Shimbun.

https://www.nikkei.com/article/DGXZQOUB2324J0T20C22A9000000/.

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