Australia and the Yen
The USD/JPY briefly fell to 83.60. This was followed by a spate of stories all of which indicated that the government of Japan is extremely displeased- and critics of the Prime Minister are publicly upbraiding him for not already having acted. The Prime Minister protests that on the contrary – the Yen is his top priority.
We know that Prime Minister Kan and Mr. Shirikawa, the Governor of the Bank of Japan met two days ago – which was before the most recent low was recorded: But no agreement appears to have been reached.
The Minister of Finance is talking publicly about the possibility of intervention- public pressure which suggests that the BOJ has not yet fully committed to the idea. But to make intervention work will require the BOJ which is next scheduled to meet on September 6 and 7.
Given that the Japanese exporters have been clobbered by the strength of the yen and that the government is clearly freaking out over it do not be shocked if even more pressure is applied to the BOJ. If you see an announcement of an emergency meeting of the BOJ it will be for one reason and one reason only.
Be prepared to sell the yen.
An Aussie Update
Meanwhile, for the second time this year, we are seeing the dreaded words "hung parliament" after an election. This time it is in Australia. Mr. Abbott appears to have a slight edge over Labor BUT please be aware that up to two million irregular ballots remain to be counted- these comprise about 14% of the total.
An irregular ballot can be one that was cast at the wrong polling place, a mail in ballot that arrived late, etc. If Mr. Abbott and his Coalition (essentially Conservatives) retain the 74 seats that they have won then they can reasonably be expected to add the two independents who oppose the 40% mining tax that the Labour party wants to impose- and Mr. Abbott becomes prime minister- and this could be AUD strengthening. But if the remaining votes alter the electoral landscape a different result is possible.
Counting the remaining votes may take until September 3, so the AUD/USD, AUD/JPY, etc could be very volatile for this reason alone for the next two weeks.
Meanwhile S&P has downgraded Irish bonds on concerns over the cost of recapitalizing Irish banks, concerns rise as to Greek banks, etc- This is still the year of the Euro and the EU story is not done yet. Which is part of the reason the Yen has been strengthening, leading to a crisis in Japan, etc- This really is an interconnected world and we need to remember that when we look at currencies and their fundamentals.