George Saravelos, global head of FX research at Deutsche Bank, said in a report that last month's coordinated yen-buying intervention by Japan and the United States was not only ineffective but counterproductive, and that the yen might have risen further if authorities had not intervened at all. He noted that the United States signaled it would not tolerate direct sales of US Treasuries by encouraging Japanese authorities to use the Fed's FIMA repo facility, making it unlikely that Japan would borrow dollar funds at expensive FIMA rates to intervene, and raising the hurdle for additional intervention. He also said that US participation in the currency market was hardly an intervention in practice, and that changes in the weekly valuation of the SOMA balance sheet showed the Fed contributed nothing to the intervention, in contrast to past coordinated Japan-US interventions where costs were typically split evenly. He further expressed the view that Japan's economy has no debt problem, and that if the Bank of Japan begins raising rates at a pace typical of a normal central bank and the yen ceases to be a low-yielding currency, the yen will ultimately appreciate.
Deutsche Bank Aktiengesellschaft
