Can governments really control financial markets, or can they simply delay the inevitable?
Japan has spent nearly $100 billion trying to support the yen, with the US taking the extraordinary step of joining the intervention. But despite the firepower, the forces driving the currency, interest rate differentials, the carry trade and Japan’s economic fundamentals, haven’t simply disappeared.
In this episode, Anthony Cheung and Piers Curran explain how FX intervention actually works, why governments and central banks step into financial markets, and why intervention often treats the symptom rather than the underlying cause.
We also revisit the extraordinary 2015 Swiss franc collapse, when the Swiss National Bank abandoned its currency floor and triggered one of the most dramatic moves in modern FX history, before looking at the US Treasury market and the attempts to bring rising long-term bond yields under control.
From the Japanese yen to US Treasuries, this is a practical guide to what happens when governments decide to fight the market and why the market often has the final say.
(00:00) Can Governments Control Markets?
(07:26) Why the Yen Is So Weak
(15:24) The Yen Carry Trade
(17:59) The Intervention Explained
(19:41) Symptom or Disease?
(21:14) Japan’s $100bn Intervention
(27:11) The Swiss Franc Collapse
(41:10) The US Bond Market Problem
(45:51) What Could Break Next?
(52:49) What Happens Next?
#trading #investing #business
Wow, I remember trading JPY pairs when USDJPY was at 78, and they intervened because the YEN was too strong. Also was long CHF for a bit and then read about “artificial barriers” and pulled a couple weeks before the thing went down hard. How many got carried out on a stretcher that day?
SPOTIFY !
Pls can you guys talk about the Dangote refinery ipo in Nigeria on one of your episodes, its said to be the biggest in Africa. Thanks.
All a result of money printing and reckless spending by our inept governments which accelerated during covid allowing fraud to run rampant while throwing away money at home and overseas on nonsense . The causes of rising yields won’t be reported by the media and with a lack of understanding of the causes people will increasingly vote for socialism. GB30Y is in a gap down from 1997 which I think will soon be filled making yields 8%+
Bad thumbnail. Pls do better
Great Podcast. What can they do to boost their currency other than intervention? Specially when the inflation readings are coming back already below 2%? If they hike or keep hiking, they will maaaybe solve their problem with the weakening currency, but they could send their inflation back again below 1% (assuming their target is 2%) or even into negative territory, right?
What levers could they pull to address this situation more permanently other than hiking? And thanks for the advise on the Silver Week, I guess I am going to avoid shorting the JPY during that time.
“The UK could end quantitative tightening (QT), reduce interest rates, stop unnecessary bond issuance, abandon the full-funding rule (use Ways and Means overdraft account at the BoE) , reform interest payments to commercial banks (CBRA accounts), discourage financial speculation through (Spahn) taxation and increase taxes on those benefiting from higher interest rates (Taxing Wealth Report 2024).
These are political choices.” See How to beat the bond markets at Tax Research / Funding the Future blog.
Great discussion as always.