Originally posted at forexfactory on Aug 12, 2010.
Originally Posted by aediaz1
I found this news-article interesting, maybe someone else does too;
0752 GMT [Dow Jones] Number of traders in Tokyo say BOJ conducted FX rate check earlier in day, in move seen as form of verbal intervention that has in past at times been followed by actual intervention; MOF makes decision on whether or not to intervene, with BOJ conducting any actual currency market transactions. In rate check, BOJ asks commercial banks questions about currency transaction plans, possible market moves; while central bank conducts regular dialogue on market with many banks, rate check would involve more detailed questions than usual. Trader at major foreign bank in Tokyo says bank was contacted by BOJ for rate check. Other FX dealers at both Japanese, non-Japanese bank also confirm rate checks were conducted. Another senior FX dealer in Tokyo says “This was only the second time in my twenty years (working in this industry)” to have experienced a rate check. Other FX dealer at major Japanese bank says heard BOJ was asking how much USD/JPY rate could be expected to move at that time if it were to buy $10 million worth of USD/JPY. USD/JPY last up at 85.70, off intraday low at 84.94.
Yup, usually they could get their quasi government agencies like Kampo/Japan Post to buy up some USD/JPY if they wanted to.
For now the verbal intervention could cause some short covering temporarily
(few hours or few days)
Verbal Intervention will only get them so far. If equities keep sliding and risk aversion flares up, and sentiment stays bearish then they will actually need to start intervening because the currency markets love to test the central bank’s resolve and call their bluff.