Shortly after the Rap was put to bed last night, the yen collapsed in about half an hour from around 79 and change to just over 76. This would be a truly monumental move for a currency had it taken place over the course of a month, much less 30 minutes. However, at least initially, there were no financial reverberations, as slowly-but-surely the yen crawled its way back to a loss of about 1% (i.e., 79-ish), though once again it was on the move today and continued to strengthen.
As I noted, that by itself does not seem to have had any severe consequences thus far. The Tokyo stock market traded both sides of unchanged before closing slightly lower, but it was more buffeted by nuclear-oriented news, I believe, than the movement in the yen.
It’s the Thought That Counts
Also last night, it was announced that the G7 would have a meeting in the next 24 hours to discuss the yen situation. Perhaps they will decide to intervene, though I would not hold my breath expecting them to do anything too successful, given the sorry plight in which Japan finds itself. Though I suspect that the G7 finance ministers would be inclined to help the Bank of Japan and the Japanese Ministry of Finance battle the yen, I’m just not sure how effective that will ultimately be.
As for equity markets, Asia was lower, though Europe was higher, ditto the Spooz, which ground upward all night. I’m not exactly sure what news conspired to produce that rally. Perhaps it was just the fact that the disaster in Japan did not precipitate the end of the world last night. The early going was essentially a sea of green, with the indices about a percent higher. The market gained more ground in the afternoon and closed almost 1.5% higher (though the Nasdaq lagged, with some of the high-flyers under pressure).
Away from stocks, the dollar was weaker against the yen, as well as other major currencies. Bonds were lower. The metals were slightly higher.
Speaking of gold, in an email from a Goldman Sachs trader (who I find to be both accurate and useful), he noted that much of the selling that has been seen in the gold market has been from fast-money and leveraged types. In the last day or so, physical buying has accelerated and, in particular, demand has been seen from the “official sector” (read: central banks).
In the short run, leveraged speculative players almost always swamp physical buyers, but in the end it is the physical buyers who have been the driving force behind the 10-year gold bull market.