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Thursday, September 07, 2006

Yen Up, Yen Down

This one in Bloomberg brought a smile to my face:

Yen Jumps After Mirow Says IMF to Discuss Currency's Weakness

The yen jumped after German Deputy Finance Minister Thomas Mirow said the currency's weakness will be discussed when finance ministers and central bank governors meet in Singapore next week.

``The yen has clearly weakened against the dollar but also against the euro, and in so far this will surely be discussed,'' Mirow told reporters in Berlin today.

``There's growing unease outside Japan about the yen's weakness and government officials will have something to say about it,'' said Carsten Fritsch, a currency strategist at Commerzbank AG in Frankfurt.

The yen advanced to 116.26 against the dollar at 7:15 a.m. in New York, compared with 116.65 late yesterday. It also had its biggest gain against the euro since May, climbing to 148.17 from 149.39. The euro fell to $1.2727 from $1.2806.

Japan's currency has slid 6 percent since reaching 109 per dollar on May 17, the highest since September 2005. It also dropped to a record 150.73 versus the euro on Aug. 31.

Now the 24 hour change isn't that great, but the timing IS impeccable. So you can put two readings on this, either markets reacted anticipating changes, or someone somewhere threw a switch to try and ward-off criticism.

There are sort of wheels-within-wheels here, because of course it was a little strange that the yen should be so low against the euro if the Japanese economy was in the process of powering back into the growth arena.

So again you could read the low yen in a number of ways. It could be a sign that many in Japan don't believe the recovery story, and are hedging just in case, or it could be that the disappearance of deflation is in part produced by a policy of steering the yen downward. Choices to suit all appetites, so take your pick. Mind you, if it was the latter, then that *would* explain it if there had been a little hand reaching out discretely to throw a symbolic switch :).

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