A while back I noted that the yen, particularly EUR-JPY, had lost its previously incredible predictive value, and was no longer correlated to later fluctuations in the price of gold, or, as it turned out, pretty much any other asset class.
Yves Smith says “his sources in Asia” say China won’t let the yuan appreciate without first seeing an appreciation of the yen: in other words, in this environment, the Chinese government is buying yen.
It makes sense. The Japanese are the other big mercantile “power,” and if the Chinese allowed the yuan to appreciate against all currencies, Chinese exports would hemorrhage market share relative to Japanese exporters. To forestall that outcome, the Chinese have been buying up yen independently of other market movements, so whereas a rise in the yen’s value previously signaled evaporation of worldwide liquidity, some of the most recent rises in the yen’s value now imply Chinese buying, and Chinese injections of liquidity into the global marketplace.
It sounds like the Chinese have a lot more yen to buy up.