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No Yen for Yen

10-31-2023

In overnight news, the Bank of Japan blinked once again, as it continues to shoot itself in the foot by indicating it would allow long rates to trade up to around 1% while keeping its idiotic policy of negative interest rates. Over the last year the BOJ has allowed the intervention rate for yield curve control to rise from 25 to 100 basis points, but all that has succeeded in doing is to wreck the yen.

Breaking Uneven At some point the BOJ will be forced to address that error and rates in Japan will rise, as they have elsewhere in the world. Not that they haven't already, but they will "normalize" even more. I suspect the weakness in the yen is going to force the BOJ's hand. The only question is, does the yen need to trade at 155 or perhaps 160 to get Kuroda & Co. to wake up and realize that the currency market has had enough, so they may as well get busy with addressing the issue.

Turning to the stock market, it wasn't very far from unchanged through midday, as I suppose folks were jockeying for position as we reach the end of the month and in front of tomorrow's FOMC meeting (where nothing is likely to happen). In the afternoon, the market gained about 0.5%.

Away from stocks, green paper was stronger, as the yen fell 1.5%, fixed income was mixed, a little weaker on the front end and a little stronger on the back end, and the metals were higher overnight, but once again sold in New York, with silver losing 2% and gold 0.5%. The miners were naturally weaker on that development.