Likewise, when the USD/JPY hit new lows the Bank of Japan followed in kind, intervening on August 4th by selling off its currency, leading to the greenback rising strongly in reply. More recently, Japan��s finance minister Yoshihiko Noda announced that the government would step in to temper the foreign exchange market if the yen continued its rise.
However, days later when the markets worried about the European banking sector and French bond spreads with Germany reached multi-year highs, the Swissie was only 70pips from parity with the euro.
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When taking recent events into consideration, including the US debt ceiling announcement, SPs downgrading US debt from AAA to AA+ and the US and Europe��s respective debt crises, this isn��t surprising.
Traditionally seen as safe havens, both the Swiss Franc and the Yen have been hit by government intervention.
The sovereign debt crisis has excluded Europe, the United Kingdom is still suffering from the result of the GFC and commodity currencies, like the AUD, NZD and CAD, are too contingent on global growth and good commodity prices. And, developing currencies are often tightly controlled, like the Chinese Yuan and SGD.
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After hitting new highs against the EUR and the greenback, the Swiss National Bank (SNB) started intervening in their currency from August 3rd. Taking the market by surprise, it first lowered interest rates to zero to deter foreign investors from buying the currencytheir currency, the logic being that investors would like higher-yielding assets.
Safe haven intervention and fx trading
The past month has been a volatile time for the markets, and currency exchange, typically the most liquid of all discount louis vuitton , has been no exception.
Now the SNB is allegedly considering a potential peg to the euro, negative interest rates or perhaps weakening the Swiss Franc. It may even set a target range for the currency, with a floor in USD/CHF and EUR/CHF. If the Swissie hit that floor, it might formalise direct intervention in the forex market.
This means that louis vuitton Monogram canvas , when trading foreign exchange, traders need to price the possibility of central bank intervention risk into their trading; central banks often do not give alert and, after they intervene, the effect of their actions can be unpredictable. Rather than rushing into the Swissie and Yen when risk is running high, traders need to acknowledge that the SNB and BoJ are now willing to use their power to separate their currencies from the safe haven title. If they succeed discount louis vuitton , this may have major implications on the currency market as there aren��t any obvious choices.
However, another element has been altering market dynamics recently; government intervention.
This is probably going to change the standard relationships in the foreign exchange market, as an absence of safe havens will simply increase the attractiveness of gold and treasuries in unstable markets. That being said, in the foreign exchange market something is always going up, which means that, without standard safe havens, markets will instead focus on relative value.
Learn more about safe haven currencies and other forex market concepts at Talking Forex �C a n introduction to forex trading. Please remember that FX trading might not be appropriate for everyone, so please make sure you fully understand the risks involved.