Remember when the G7 stepped in to valiantly sell yen when the Japanese currency was threatening to take out all of Wall Street with its hundreds of billions in wrong way carry trades? Well, it seems that today’s bizarre sell off in the dollar was due to that particular plan crashing and burning, with Korea defecting from the pact first, and selling its $7 billion in USD acquired in the process of bailing out Japan. It seems it is fair game to buy the Yen once again. From a trading desk:
USD getting spanked today is Bank of Korea selling $7Bn USD it bought during the coordinated USDJPY intervention, and buying GBP and EUR with it. I can understand why they would get rid of the USD, but why buy GBP and EUR with it???? Either way, goes to show how useful it is to do an intervention, they drop the reserves 2 weeks after… we’ll be back to square 1 in no time if everybody follows suit!
Remember – he who defects first and all that jazz…
(and yes, if $7 billion can move the EURUSD by 180 pips, we dread to see what the actual carry unwind instead of just impairment would look like).
Submitted by Tyler Durden on 04/01/2011 16:20 -0400
Source: ZeroHedge