DOLLAR-YEN: Bank of New York Mellon's Simon Derrick says the threat
of BOJ intervention is likely to be one of the defining themes for the
remainder of 2010. With "the EUR, USD and GBP facing significant
economic headwinds through the remainder of the year (as yesterday's ADP
and PMI data highlighted all too well) and question-marks over the
likely demand for commodities keeping the related currencies in check,
the JPY (along with the CHF) remains one of the few majors left to buy,"
he says. Intervention, if and when it comes, will likely be unilateral
(BOJ alone), given the US attitude toward freely trading markets.
Politics will likely play a role in the timing. "Given the upcoming DPJ
leadership election on Sept 14, it would seem reasonable to assume that
PM Naoto Kan would prefer not to muddy the water by having to authorize
FX intervention," Derrick says. This is in contrast to contender Ichiro
Ozawa who has voiced support for the BOJ stepping in, he notes.