Yen Will Strengthen Once BOJ Pulls Back, Commonwealth Bank Says

Richard Grace, chief currency strategist and head of international economics in Sydney at Commonwealth Bank of Australia, comments on the dollar and yen after Japan intervened to stem gains in its currency.

The Swiss National Bank yesterday lowered its target for the three-month London interbank offered rate to “as close to zero as possible,” from 0.25 percent.

Japan’s intervention “may be successful for a short period of time but I don’t think it will be successful over a long period.”

“As soon as they pull back from the market, we’ll probably see dollar-yen go back down again.”

“Defending a particular level is probably an easier task and we’re not sure where that level is, it may be something close to 79 or a band between 77 and 79” yen per dollar.

On other central bank action:

“We’re seeing the policy responses from the central banks whose currencies have strengthened the most against the U.S. dollar over the last 12 months, and they’ve got more reason to intervene.”

“I don’t think the Reserve Bank of Australia would go down that road, you’re more likely to see it from New Zealand’s central bank, but I don’t think they’re at that point yet.”

“I don’t think you’re going to see it either from the European Central Bank or the Bank of England. With the Bank of Canada, I don’t think so, but the risk is a little higher.”

“It would be very unusual for the RBA to intervene when they’ve got an inflation problem on their hands. Why would they want a weaker currency?”