Investor's window  |  April 04, 2013 12:11:19

The race continues in depreciating currencies


The degradation of paper currencies remains in vogue. Last time it was able this morning the Bank of Japan, which announced in 2014 that it intends to increase the monetary base from the current 134 to 270 trillion yen, when it decided to increase purchases of bonds and other securities (ETFs, REITs). All in an effort to reach new inflation targeting, which last year increased from one to two percent. Higher inflation and a weak currency to be the new prime minister of the country, the newly appointed Governor of the Central Bank, the only proper cure for the ailing economy.

The Bank of Japan thus became the overnight central bank with the most expansive monetary policy. While since 2008, its balance sheet has grown by only 50% over the next 20 months should be doubled. The pace of growth will be enormous and even surpass the current quantitative easing in the U.S., which should balance the Federal Reserve to inflate at the same time "only" about half.

Change in total assets of Swiss, British, American, European and Japanese central banks since 2008

Expected developments Fed's balance sheet (right axis in billion USD) and the balance of BOJ (left axis trillion. JPY) if that does not change the current setting of monetary policy, both central banks

What does all this mean for the yen? Namely, that his seven-month continuous attrition is not only due to the anticipation and speculation in the further development of monetary policy in Japan, but finally has a solid foundation. Until now, the Bank of Japan of a weak yen and only spoke almost no words were accompanied by deeds.If this situation continued for some time, JPY could start rapidly solidifying, which, after all, also suggested his growth from the last three weeks.

Reality finally caught up with expectations. This does not necessarily mean that starting today begins again JPY sharply diminish. Twenty percent weakening of the currency, and the associated rise in Japanese stock index by 45%, after all markets will need some time to absorb. However, if the Bank of Japan's monetary policy in the future really does not change anything, now has primed JPY to remain in the coming months (years?) Remains one of the world's weakestcurrencies, which the Japanese - and import energy depends entirely - the economy sooner or later feel full.

Jaroslav Brychta

Jaroslav Brychta - principal analyst at X-Trade Brokers

  • He graduated from the Economic Policy at the Silesian University in Opava. The XTB operates since 2007, currently as chief analyst.It mainly deals with the analysis of exchange rates, as well as bonds, the banking sector and monetary policy. His professional articles and interviews contributes to most of the leading media.
  • Logo XTB X-Trade Brokers (XTB) is an international brokerage house that provides its clients with professional trading conditions for forex, commodities, stocks and options. Its services are constantly improving, as evidenced by a number of international awards and it is confirmed by the titles Broker Forex broker and year, obtained at the Investment Summit MoneyExpo 2012th

    In addition to the standard menu XTB allows Forex traders direct access to the marketThrough which they can reach the lowest spreads. Beginning options traders can use the optional possibility of opening an account with no minimum deposit of 2500, - CZK . For XTB offers its clients advice on trading, 24 in the Czech language support, free training courses and daily news from the financial markets.


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