BOJ sends survey to banks on overseas intervention

Discussion in 'Wall St. News' started by ASusilovic, Nov 25, 2011.

  1. By Takashi Mochizuki

    -- BOJ surveys banks to see if they can help with intervention, according to people familiar with the matter

    -- Survey asks if banks' overseas branches can undertake forex trading on BOJ's behalf

    -- The move is seen as another warning to the market

    TOKYO -- The Bank of Japan has sent a questionnaire to major banks asking whether they can help it intervene in currency markets overseas--a move seen as a "new front" in the central bank's campaign against the strong yen.

    The central bank has been polling financial institutions in Tokyo for about the past two weeks, both in writing and verbally, according to people familiar with the matter.

    The brief survey asks several questions about how the bank can help the BOJ with its intervention, which is carried out under the control of the Ministry of Finance.

    Market participants say the survey represents a new tactic to rein in the yen. Some see it as a way to find out if the central bank can undertake "secret" intervention during European or North American trading hours.

    "Basically what's being asked is: "Are your branches overseas able to take orders from us?'" said one dealer.

    Japan has intervened in the foreign exchange market four times since September 2010 to try to curb the yen, which is seen as a safe haven amid global turmoil, but the strength of which causes serious harm to the country's export-dependent economy.

    The dollar was at Y77.35 as of 0945 GMT. Traders believe the authorities may act if it falls into the Y75-Y76 range.

    These open interventions have been coupled with repeated warnings to the market and, most recently, unannounced "stealth" intervention designed to slow the yen's rise.

    The BOJ has several ways in which it can intervene, including through the EBS trading platform, which allows it to place its own orders that are seen in the market. In the recent, announced interventions since September 2010, Japan sold the yen in London and New York hours using EBS.

    The BOJ also has highly confidential relationships with a number of banks, with special phones to convey orders that would then appear to come from the banks instead of the BOJ. Market sources and officials familiar with the matter say this has taken place as a follow-up to the massive Y7.5 trillion intervention on Oct. 31.

    Traders say stealth intervention overseas could be effective in keeping the yen below a certain level, as Japan has thus far traditionally intervened mainly during Asian trading hours.

    A widespread belief in the market is that the BOJ conducted unannounced yen-selling during Tokyo time for at least a week from Nov. 1.

    The authorities have refused to comment on the matter, but a trader at a Tokyo financial firm said it wasn't difficult for Tokyo traders--who are highly sensitive to BOJ moves--to detect such secret intervention.

    Izuru Kato, chief economist in Tokyo at the money-market brokerage Totan, concluded the BOJ had been in the market after spotting unusual flows in the BOJ's regularly announced flow data.

    Detecting such intervention overseas would be more difficult, however.

    "I don't say it would be impossible to find out, but it would certainly be harder to do so if the BOJ acts overseas instead of in the home market," a dealer said.