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Yen Crisis Ahead of G-7 Conference Call Tonight; Central Banks and Government Intervention Tested

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With finance ministers and central bankers from the G-7 scheduled for a conference call tonight to discuss the human and economic crisis in Japan, the shocking rise in the Yen to a post World War II high versus the dollar will provide plenty of additional concerns to discuss.

As you can see the chart below shows the Yen has been rallying against the dollar since the earthquake and tusnami occurred, though the move on Wednesday evening EST was surprising in its intensity, the largest move against the dollar since May 6, 2010. You may recall at that time the concern was Greece's debt crisis. Shortly thereafter the Yen fell the most in a year on prospects central banks and governments would act in concert to stem what was feared at the time would be contagion from Greece's debt crisis.

"We must be at the disposal of our Japanese friends on the monetary side," French economy minister Christine Lagarde said after a cabinet meeting in Paris, according to news reports. "I have called for a G7 meeting at the level of finance ministers and central bankers" to thrash out how best to offer financial support to Japan which has been rocked by a monster earthquake, tsunami and a damaged nuclear plant."

Bottom line: Yet another test of coordinated government and central bank intervention. And you can be sure that financial support discussions for Japan will include not only the Yen but support for Japanese markets overall. Nikkei 225 futures have already traded as low as 8530, down nearly 5% from the closing level of 8950.
POSITION:  No positions in stocks mentioned.