The yen won’t keep falling! Standard Chartered experts recommend that you deploy to this price in batches

The exchange rate of the US dollar against the yen fell below the “Kuroda line of defense” of 125 yuan for the first time this week. Liu Jiahao, head of the investment strategy department of the Wealth Management Office of Standard Chartered Bank, said in the “2022 Investment Outlook Conference” today that the Japanese economy is vulnerable to rising energy prices. After the Russian-Ukrainian conflict escalated, it did not rise but fell, failing to show the risk aversion characteristics in the past, but the yen has shown signs of oversold recently, and the dollar against the yen may fall back to 115 yuan.

Liu Jiahao said that the yen is different from the central banks of various countries. European and American countries have started to reduce, and the Bank of Japan still insists on a loose state. Therefore, from the perspective of interest rate differentials, it is indeed not conducive to the performance of the yen. Moreover, when there were geopolitical risks in the past, the yen It may play a role of hedging, but in this Russia-Ukraine conflict, we did not see such a feature at all.

Liu Jiahao pointed out that the main reason is that Japan, as an importer of energy and raw materials, may have a situation where raw materials are rising and energy prices are rising, which will be relatively unfavorable to Japan’s economy. The official start of the subsidy response, so it seems that monetary policy easing and fiscal subsidies will indeed be unfavorable for the yen’s trend in the short term.

From the point of view of the real demand for the yen, Liu Jiahao pointed out that the exchange of foreign exchange can be started in batches now, but if it is a foreign exchange operation investment, from the perspective of the whole year of this year, the yen may still maintain a trend of easy depreciation and difficult to rise, so it is recommended to simply do For foreign exchange operations, for the time being, it is still a wait-and-see approach.

Judging from the role of the yen as a safe haven, Liu Jiahao pointed out that this time is more special because of the background factors, mainly because of the interest rate difference. Both Europe and the United States have released hawkish messages, but the Bank of Japan has instead emphasized the need to continue. Loose, so the spread is a major factor, not just because of the role of hedging.

Liu Jiahao shared that the yen has fallen below the “Kuroda Line of Defense” price of 125 yuan this week. At this stage, the attitude of the central bank of Japan is still relatively loose, so there is an opportunity to test the price of 130 yuan, but the Japanese Minister of Finance has also come out to shout, if The excessive depreciation of the yen may affect the domestic economic situation in Japan.

From the perspective of impact, Liu Jiahao pointed out that at present, it seems that the Bank of Japan will start to pay attention to this wave of sharp depreciation, and the speed of depreciation must be slowed down, because on the one hand, devaluation is beneficial to exports and drives profits for manufacturers, but imports The increase in the cost of the currency may become a double-edged sword, so the follow-up should observe the expectations of the Japanese Ministry of Finance for devaluation.

In the short term, Liu Jiahao pointed out that the yen may remain in the range of 120~125 yuan, and whether it will depreciate further depends on the interest rate spread factor, because the long and short-term interest rate spread of US government bond yields has been shortened. The momentum supporting the outflow of the yen has gradually weakened, so it is not expected that the yen will continue to depreciate, and the yen has been showing signs of oversold recently, and the dollar against the yen may fall back to 115 yuan.

Long queues at ATMs in Russia and Ukraine | Threaten to explode the Great Depression

Russia has attacked Ukraine in an all-round way. The news shows that Ukrainian people who are eager to withdraw funds have long queued at bank ATMs, and even Russian people have rushed to the ATM because they are worried that they will not be able to withdraw cash. According to foreign media analysis, the impact of bank runs on the economy can be borrowed from the Great Depression of the US economy in the 1930s.

The Wall Street Journal reported on the 24th that the day after Russian President Vladimir Putin ordered a “special military operation” against Ukraine on the 24th, there were long queues in front of ATMs in Moscow banks, and people were worried that the government may restrict people from withdrawing cash. News of the cash being withdrawn from banks flooded social media.

Reuters reported that Ukrainian residents who chose to stay in Kiev also formed long queues outside banks and shops, hoping to withdraw cash and stock up on supplies. Others hurriedly packed their bags and looked around for transportation out of the city.

Business Insider reported on the 24th that local Ukrainian banks have decided to set a cash withdrawal limit. The Donetsk People’s Republic (DPR), located in the Udon region, this week restricted people to withdrawing 10,000 rubles (about $129) a day from ATMs. The National Bank of Ukraine also set the daily withdrawal limit at 100,000 Ukrainian hryvnia (about 3,339 U.S. dollars) on the 24th.

In order to avoid a domestic disaster, the Russian central bank announced emergency response measures on the 23rd, and the Russian stock market plummeted 38% on the same day due to the war between Russia and Ukraine. The Russian central bank’s plan includes closing the stock exchange and buying hundreds of millions of rubles, but it has not yet set a limit on people’s withdrawal of cash.

The fear of a run caused by these phenomena could eventually become a “self-fulfilling prophecy”, leading to bank failures, the report said. During the Great Depression in the United States from 1929 to 1939, there was a bank run incident, which eventually led to a large wave of unemployment and no way for people to get loans.

David Wheelock, senior vice president and special policy adviser to the president at the Federal Reserve Bank of St. Louis, pointed out in 2013 that locations with high rates of bank failures in the United States also saw larger declines in consumer spending.

After the Wall Street crash in October 1929, anxious Americans went around withdrawing cash, and many banks were forced to fail. With limited daily deposits in bank vaults, there was a sudden run on the bank, forcing the bank to sell assets in exchange for cash to customers who wanted to withdraw money, and then collapsed and went bankrupt.

The Federal Reserve Bank of St. Louis reported thousands of bank failures, leading to shrinking lending activity, business closures and rising unemployment. The crisis also sparked deflation, as bankers decided to build up cash reserves and people struggled to hoard cash. As deposits dwindled, so did the amount banks could lend, meaning people had less money to pay for goods and services, and the prices of those goods and services dwindled.

According to the St. Louis Fed report, deflation has further forced banks, businesses and debtors into bankruptcy, reducing consumption and ultimately driving up unemployment.