China And Japan Dropping Dollar Cross Rate System, Will Transact Directly

China And Japan Dropping Dollar Cross Rate System, Will Transact Directly (ZeroHedge, May 26, 2012):

While various three letter economic schools of thought continue sprouting left and right, in an attempt to validate endless spending predicated on one simple thing: transitory reserve currency status, and we emphasize transitory, reality moves on, oblivious of what economic theoreticians believe it should be doing. As Yomiuri Shimbun reported last night, China and Japan are set to launch direct currency trading, bypassing the dollar, and the associated benefits and risks, entirely. “But how can that be?” dollar purists will scream. After all, when one bypasses the dollar, one commits blasphemy to a reserve currency. Somehow we think China gets that. From the AP: “Japan and China are expected to start direct trading of their currencies as early as June as part of efforts to boost bilateral trade and investment, according to reports. With the planned step, exchange rates between the yen and the yuan will be determined by their transactions, departing from the current “cross rate” system that involves the dollar in setting yen-yuan rates, Kyodo News said on Saturday.”

More specifics on how the world’s second and third largest economy will just say no to dollar hegemony:

The two governments are eyeing setting up markets in Tokyo and Shanghai, the Yomiuri Shimbun said.

The yen-yuan exchange system would help businesses in the world’s second- and third-largest economies reduce risks associated with exchange rate fluctuations in the dollar and cut transaction costs, Kyodo said.

It will be the first time that China has allowed a major currency except the dollar to directly trade with the yuan, Kyodo said.

As usual, why spend time commeting with words, when a simple chart will suffice.

The REAL STORY Your Governments, MSM And The Central Banksters Completely Forgot To Tell You About: ‘The Race To Debase In All Its Glory’ (Chart)

The Race To Debase In All Its Glory (ZeroHedge, Feb. 19, 2012):

Lest anyone forget what the real story is, here is a reminder. Thank you neo-Keynesian economics for making a mockery of non-scientific notation.

US Dollar Tumbles To Record Low Against Swiss Franc, New Lows Against Yen

Just wait until (Black?) Monday!


Dollar Tumbling To Record Low Against Swiss Franc, New Lows Against Yen (ZeroHedge, Aug 7, 2011)

For an early look at the risk aversion gripping the market look no further than the USDCHF and the USDJPY, the first of which just took out 0.75, and the second now almost at BOJ intervention levels. Ironically, since the math Ph.D.s have still not recalibrated their models, it is very likely that the collapse in the dollar will lead to an explosion in ES courtesy of the inverse correlation, which will once and for all confirm that global capital markets and now nothing but a robotic circus.

USDJPY:

USDCHF:

Cross currency:

The G7 Turns On Itself: Bank of Korea Sells Its Share Of Japan Rescue Dollars, Sends Greenback Plunging

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).

Read moreThe G7 Turns On Itself: Bank of Korea Sells Its Share Of Japan Rescue Dollars, Sends Greenback Plunging

The Day The Yen Carry Trade Died


(Click on image to enlarge.)

While everyone is staring in disbelief at the USDJPY, the real carry action is in the high yielding-YEN pairs, i.e., the development, high growing countries. And it’s a massacre: ZARJPY, NZDJPY, AUDJPY – all are plunging far more than the USD. This is nothing short of a complete carry trade unwind.

The implications: the cheapest recurring source of funding for risk assets – the Yen carry trade, is over. Those who managed to sell early on are lucky. The rest will get such an onslaught of margin calls tomorrow they may need to access the discount window (if Primary Dealers and the luckier banks).

Many will be forced to sell assets to satisfy collateral requirements as ongoing sales of carry pairs push the Yen ever higher, and force ever more liquidity out of the market. And if the Yen carry trade is done, the question is when will the USD, which has also been a carry currency for some time, follow suit.

Read moreThe Day The Yen Carry Trade Died

Emergency: Record Collapse: USDJPY Flash Crashes As All Support Taken Out – USDJPY Goes Bidless – Technical USDJPY Observations: ‘If The Down Move Continues, 71.70 Is Next’

Support broken as the dollar yen plunges to an all time record low. Everyone now watching the Nikkei to see if it opens. That the BOJ has not intervened yet is beyond ominous, and nothing short of a death sentence for the Yen carry traders.

One can only watch this devastation with horror. USDJPY drops to 76. Unbelievable. Many Wall Street FX desks are blowing up right at this moment.

Submitted by Tyler Durden on 03/16/2011 17:17 -0400

Source:  ZeroHedge

John Noyce Is First With Technical USDJPY Observations: “If The Down Move Continues, 71.70 Is Next” (ZeroHedge):

Goldman’s John Noyce is the first FX technician with a proposed take on tonight’s stunning developments. Keep in mind, he, like everyone else is in uncharted (pardon the pun) territory.

Quick JPY Charts – Wednesday 16th March 2011

There are two ways of arriving at a downside target of 77.75-77.56;

  • An equal size pip drop from the June ’07 high to that from the August ’98 high to the November ’99 low would target 77.75
  • The extension target of the triangle which formed from 1st November ’11 to 15th March comes in at 77.56

The market has been below this region intraday, but, the NY 5pm close was at 77.90 according to the EBS data we use. If we were able to stabilise around 77.75-77.56 you could argue that the last part of the drop was set in an extreme situation with poor liquidity etc. definitely something to watch closely. Not to say the call was for a move this sharp in the first place, but with the help of hindsight on two counts you could argue “target met”.

..If.. the down move does continue the next really clean level is the actual parallel channel support off the August ’98 high which comes in at 71.70 on the linear scale chart.

Goldman Noyce

Japanese Investors To Dump Overseas Assets To Bring Their Money Home To Rebuild

Before:

PIMCO Total Return, The World’s Largest Bond Fund, Dumps All US Government Debt Holdings


(Reuters) – Shaken by the prospect of nuclear meltdown after a devastating earthquake and tsunami, Japanese investors will dump overseas assets on Monday and bring their money home to help finance reconstruction.

Positioning for this could send the dollar plummeting versus the yen on Monday and lead to a sharp slide in Treasuries since U.S. government bonds are a favorite asset of Japanese investors, market analysts said.

Stocks also are likely to come under pressure.

Japanese insurers will probably sell some of their most liquid foreign assets such as U.S. Treasuries so they can respond to the worst disaster since World War Two.

Read moreJapanese Investors To Dump Overseas Assets To Bring Their Money Home To Rebuild

Standard & Poor’s Downgrades Japan’s Credit Rating On Debt Concerns, Yen Tumbles, Yields Rise

In other news:

Forex traders send yen tumbling (Financial Times)

Japan Yields Rise on S&P Downgrade (Wall Street Journal)

Dollar Jumps Vs Yen After Japan’s Debt Rating Cut (ABC News)

FOREX-Yen slides on S&P downgrade of Japan long-term debt (Reuters)


Standard & Poor’s on Thursday cut Japan’s credit rating for the first time since 2002, accusing the government of lacking a “coherent strategy” to ease the highest debt of any industrialised nation.

The US credit risk appraiser cut its rating on Japan’s long-term sovereign debt to “AA minus” from “AA”, saying that it expected the country’s groaning fiscal deficits to stay high in coming years.

It was the first downgrade of a G7 member since Italy in October 2006, and underlined mounting problems with national debts since the 2008 financial crisis. Four eurozone members including Spain suffered downgrades last year.

“The downgrade reflects our appraisal that Japan’s government debt ratios — already among the highest for rated sovereigns — will continue to rise further than we envisaged before the global economic recession hit the country and will peak only in the mid-2020s,” S&P said.

“The Democratic Party of Japan (DPJ)-led government lacks a coherent strategy to address these negative aspects of the country’s debt dynamics,” it said.

The Japanese currency tumbled following the announcement, with the dollar gaining by a more than a yen to 83.20 yen from around 82.12 in earlier trade, before recovering to around 82.76 to the dollar.

Read moreStandard & Poor’s Downgrades Japan’s Credit Rating On Debt Concerns, Yen Tumbles, Yields Rise

Japan Mulls Monetisation of Public Debt And Yen Devaluation By 30 Percent

Wake up Japan!


Japan’s ruling party has called for drastic monetary easing to devalue the yen by 30pc and halt the slide into deflation, putting it on a collision course with the Bank of Japan.

japan-mulls-monetisation-of-public-debt-and-yen-devaluation-by-30-percent
Lawmakers from the Democratic Party of Japan called for the exchange rate to be steered to ¥120 against the dollar, from around ¥90 currently. (Bloomberg)

A draft by 130 lawmakers from premier Yukio Hatoyama’s Democratic Party of Japan said the country needs a radical shift towards growth policies, calling for an inflation target above 2pc. The exchange rate should be steered to ¥120 against the dollar, from the current ¥90.

Shizuka Kamei, financial affairs minister, said the central bank must monetise government debt to support the market for state bonds and prevent deflation becoming deeply lodged in the economy.

The Bank of Japan’s governor, Masaaki Shirakawa, told lawmakers that it would illegal to fund state spending by printing money. “History has proven that central banks directly buying government securities caused severe inflation and dealt a blow to the economy. The BoJ is now providing adequate funds,” he said.

Read moreJapan Mulls Monetisation of Public Debt And Yen Devaluation By 30 Percent

Sumitomo Chief Strategist: US Dollar to Hit 50 Yen, Cease as Reserve Currency

The coming US dollar crisis will be created in order to push through with the New World Order:

Global banking body may be needed – FSA:
“LONDON (Reuters) – A global body with legal powers may be needed over time to enforce the world’s new financial rules, the Financial Services Authority (FSA) said on Wednesday.”

“Formerly known as the Financial Stability Forum, the FSB was expanded in April to include central bankers and finance ministry and regulatory officials from all Group of 20 (G20) countries.”

‘Problem’: In this case the coming US dollar crisis.

‘Reaction’: In this case a public outcry for stability and security.

Always the ‘Solution’: The New World Order. In this case the ‘New World Financial Order’


yen-and-dollar-notes
1000 yen notes are arranged on top of U.S. one dollar notes in New York, in this file photo. Photographer: Andrew Harrer/Bloomberg

Oct. 15 (Bloomberg) — The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

The dollar last week dropped to the lowest in almost a year against the yen as record U.S. government borrowings and interest rates near zero sapped demand for the U.S. currency. The Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, has fallen 15 percent from its peak this year to as low as 75.211 today, the lowest since August 2008.

The gauge is about five points away from its record low in March 2008, and the dollar is 2.5 percent away from a 14-year low against the yen.

“We can no longer stop the big wave of dollar weakness,” said Uno, who correctly predicted the dollar would fall under 100 yen and the Dow Jones Industrial Average would sink below 7,000 after the bankruptcy of Lehman Brothers Holdings Inc. last year. If the U.S. currency breaks through record levels, “there will be no downside limit, and even coordinated intervention won’t work,” he said.

Read moreSumitomo Chief Strategist: US Dollar to Hit 50 Yen, Cease as Reserve Currency