Sunday, October 31, 2010

Yen Rising against Dollar : Another rationale

Marc Chandler writes at SeekingAlpha this very good piece on reason on recent rise of YEN on Dollar.

According to Marc, Main reason for YEN's rise.

At the end of September foreign banks had JPY45.7 trillion (~$562 bln) of excess reserves sitting with the BOJ. That was increase from JPY20 trillion since end of May.
Non-Japanese banks appear to be using the swap market to secure yen funds at less than 10 bp, which is what the Bank of Japan pays on excess reserves and is about the rate that a 3-month bill pays.
The real play is the yen, and the bill gives the most direct exposure for many institutional investors who may be prohibited from taking on naked currency exposure.

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