Exchange Market Quotation: Stronger Yen And Stronger Strength

Morgan Stanley (Morgan Stanley) recently pointed out that the strong yen itself triggered a further upward attack on the exchange rate.

Morgan Hans Morgan Stanley Global FX Strategy, head of team Hans Redeker, wrote in the report:

With the fall in US bond yields, the US dollar / yen also slipped sharply, and the strong yen triggered more strength, thereby defeating all the Japanese authorities' stimulus efforts.

Indeed, the latest.

The central bank's short cut data show that Japanese companies expect us dollar / yen average price to be 117.46 this year, forcing companies to have greater risk of hedging yen.

Over the past few weeks, the euro has been rising moderately, but the yen has risen sharply, and the US dollar / yen is now close to our 105 year target.

The negative performance of the European and Japanese stock markets and the strength of the exchange rate suggest that the two big economies need more policy stimulus. However, from the current situation, it is very difficult to sacrifice subsequent stimulus.

The difficulty of fiscal policy is that the government has long been in debt, and all kinds of unconventional measures, including quantitative easing (QE),

Many other actions can only achieve limited results.

As the US dollar / yen continues to fall, companies are likely to further reduce profit guidance, which will depress Japan.

And repeatedly suppress the dollar / yen exchange rate.

Without the cooperation of the Federal Reserve, we are deeply skeptical.

In the final analysis, the main purpose of the central bank's private asset purchase is to support portfolio effectiveness.

The QE operation in 2013/15 is an effective tool to stabilize the yen exchange rate through the first round redeployment effect. However, since the yield curve in Japan is still at an extremely low level, the Bank of Japan will need to buy more private sector assets, but this will have little effect on the stabilization of the yen.

To make Andouble economics effective, the Japanese authorities need help from US policymakers. The more serious the decline of US dollar / yen, the higher the urgency of action.

In other words, the turning point of the US dollar may be achieved through the US dollar / Japanese yen crash, which is why we think the effect of the dollar weakness will be limited.