FX traders should worry about dollar not yen
April 2 (Reuters) -FX traders should worry about the dollar not the yen because the impact of any intervention intended to support the yen could a have a huge influence on the greenback which is far important than any other currency.
After Japan intervened in 2022 the dollar collapsed and unlike the yen which surrendered all of the gains made due to that intervention, the dollar has never fully recovered.
To weaken the dollar in advance of hoped for interest rate cuts that have spurred big gains for riskier assets this year, would significantly lessen the chance of any rate cuts.
This could undermine stock markets that have risen far at the same time as the intervention undermines the one safe asset that traders might turn to should stocks drop.
The yen, which is less safe than the dollar, will continue to be undermined by the Japanese central bank's intention to maintain bond purchases. Traders are sitting long of euros already ahead of ECB easing likely to undermine it, while current SNB policy is weighing on the franc. The pound has never been considered safe and likely never will be.
Potentially there are no safe currencies for traders to turn to at a time when the BoJ could create lots of volatility, and demand for a safe haven.
This might result in a rush to buy the world's reserve currency soon after BOJ sells which could see yen fall below the point when Japan's central bank intervenes soon after the event.
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Jeremy Boulton is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond
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