Tags: SocGen | dollar | yen | BOJ

SocGen's Forcheski: Dollar Might Break 115 Yen

By    |   Monday, 03 November 2014 02:44 PM

The dollar hit a six-year high against the yen Monday, as the market continued to react to the Bank of Japan (BOJ)'s announcement Friday that it is increasing its quantitative easing.

The BOJ decided to expand its monetary base to 80 trillion yen (approximately $703 billion), up from its previous target of 60 trillion to 70 trillion yen ($527 billion to $615 billion).

"While the BOJ had been conducting an accommodative monetary policy, the timing of this announcement was a surprise and is another big step in that same direction, . . . which will likely keep downward pressure on the yen," Carl Forcheski, Societe Generale's director of corporate currency sales, wrote in a commentary obtained by CNBC.

"As far as dollar-yen is concerned, this definitely brings the 115-yen level onto the radar screen."

Many experts were impressed with the heft of the BOJ's quantitative easing.

"The figure as it stands now is already over 50 percent of Japan's nominal GDP, and this is now expected to move up to around 75 percent," Derek Halpenny, European head of global markets research at Bank of Tokyo Mitsubishi, said in a commentary obtained by CNBC.

"That is extraordinary and unprecedented."

Forcheski believes the BOJ's move could spur other central banks to weaken their currencies.

"No doubt this caught the attention of the ECB [European Central Bank], who will not likely be happy with the euro's big move higher versus the yen today in the cross, as too strong a euro-yen cross has such a negative impact on German and eurozone exports," he noted.

While Japan's economy shrank an annualized 7.1 percent in the second quarter, the U.S. economy grew 3.5 percent in the third quarter.

"The U.S. is accelerating while the rest of the world, particularly Japan and the eurozone, is decelerating," Mark McCormick, a currency strategist at Credit Agricole, told Bloomberg.

"Macro investors really are hoping for this divergence story to play out, because that's where relative value can be generated."

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The dollar hit a six-year high against the yen Monday, as the market continued to react to the Bank of Japan (BOJ)'s announcement Friday that it is increasing its quantitative easing.
SocGen, dollar, yen, BOJ
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2014-44-03
Monday, 03 November 2014 02:44 PM
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