AUD/JPY and USD/JPY are up sharply at present on the back of comments from Japanese Finance minister that G7 countries will intervene to support the Dollar (sell Yen). There is also talk they will buy stocks which is what the HKMA did during the Asian crisis.
The New York Times just sent a release out saying:
The United States and other major economies will join Japan in a highly unusual effort to stabilize the value of the yen by intervening in currency markets, the Group of 7 nations announced Thursday night in a joint statement.
Do not under estimate the power of G7 when it moves together. Single country intervention often fails but when the Fed and other Big Central banks get involved markets move out of the way. Which is exactly what we are seeing in Asia right now. I had expected intervention once the USD/JPY broke the post Kobe lows but I didn’t think it would take as long as it did nor USD/JPY drop as low as it did. But G7 is in because it does not want Yen strength to destabilise other currencies. The last thing Japan needs right now is an effective tightening on top of all its troubles from an appreciating Yen. Below is a chart of AUD/JPY showing the move.
AUD/USD is sharply higher as well on this news as the chart below shows. Word on the street is that offshore names were in buying short AUD bonds last night so they’ll be very happy with their capital gain today. Price action in AUD/USD right now is attached.
On the talk of Japanese authorities buying shares which is effectively intervention in the Nikkei. This is how the HKMA fought of the speculators and calmed the market in the Asian crisis. My personal view is that this is a superbly effective tactic in calming the markets across the board. Nikkei is now up 2.84%
There are of course no guarantees these moves will work given the tensions in markets and concerns over potential new problems, but the G7 is a powerful force still in currencies and not to be trifled with usually.