Black swan events: How currencies react - Yen
Apologies for the ominous chart title on a Monday morning, but having spent the weekend watching a few documentaries about the Japan earthquake, I was intrigued on how the currency markets react to black swan events.
The Story (Japan Earthquake - Yen)
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The Tohoku earthquake hits Japan on 11th March. What we see is a sell off in USDJPY... In other words, people were selling USD to buy the Yen. Goes to show how strongly the markets believe in the Yen as a safe haven even if crisis comes to Japan.
After a sharp drop, G7 central banks intervene in the markets to offer support. So they start buying USD and selling Yen, which forms an interim rally.
On 04/07 BoJ announces a stimulus package, which triggers another sell off in the markets. Few days later, Fukushima nuclear alert is given which sparks a continuation of the sell off.
This time it breaks the CB's support as well.
I could go on but follow the notes on the chart backed up by the news sources that explains the currency moves.
PS: For all those ECB QE addicts, I stumbled upon a very nice article which is worth reading and could possibly shed light on how European QE could work:
Source: yhoo.it/1nXW7t7
PPS: The chart is incomplete... There's just too much happening when it comes to the Yen.
The Story (Japan Earthquake - Yen)
-------------------------------------------------------------------------
The Tohoku earthquake hits Japan on 11th March. What we see is a sell off in USDJPY... In other words, people were selling USD to buy the Yen. Goes to show how strongly the markets believe in the Yen as a safe haven even if crisis comes to Japan.
After a sharp drop, G7 central banks intervene in the markets to offer support. So they start buying USD and selling Yen, which forms an interim rally.
On 04/07 BoJ announces a stimulus package, which triggers another sell off in the markets. Few days later, Fukushima nuclear alert is given which sparks a continuation of the sell off.
This time it breaks the CB's support as well.
I could go on but follow the notes on the chart backed up by the news sources that explains the currency moves.
PS: For all those ECB QE addicts, I stumbled upon a very nice article which is worth reading and could possibly shed light on how European QE could work:
Source: yhoo.it/1nXW7t7
PPS: The chart is incomplete... There's just too much happening when it comes to the Yen.