SK: Yen Intervention: Impact on Dollar, Commodities
Japan’s estimated $20 billion foreign exchange intervention on Wednesday leads to a logical question of the potential longer-term impact on the U.S. dollar (UDN) and commodities (DBC). While intervention can play a role in the currency markets in the short-to-intermediate term, market forces that were in place prior to the intervention will most likely continue to impact the U.S. dollar, copper (JJC), oil (USO), silver (SLV), and gold (GLD).
According to the Wall Street Journal:
If history is any guide, Wednesday's intervention was just the opening salvo. When Japan last intervened in the market to push the yen down, it sold an estimated 35 trillion yen ($421 billion) from January 2003 to March 2004.
The chart below shows the performance of the U.S. dollar index during the last period of yen (FXY) intervention by Japan.
