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Currency wars

The fight to defend the Japanese Yen continues after two interventions by the central bank over the last week. After tougching 160 against dollar, and spending approximately $60Bn trying to stop the depreciation, the yen sits around 153.7 vs the USD. This episode started with the Yield curve control policy and the stubbornness to defend the 0.50% level for the 10 year JGB. The central bank printed money to control yields and now it’s supposedly using reserves to defend the currency. We’ll see if the BoJ is able to defend the fort, and what is the price they need to pay for it. Perhaps unrelated (or not), the Indonesian central bank officials have reaffirmed they’re ready for the worst and are willing to do everything they can to defend the Rupiah. This resembles the beggining of the Asian currency crises in 1998. The difference is that markets are even more interconnected today than 26 years ago.


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