BOJ offers liquidity to Bank Indonesia - November/December 2011 repeat? Buying US Dollar Index and Dax

MACRO: Important change in liquidity in Asia..  

This morning Bank of Japan and Bank Indonesia announced: "12 bln. USD extended bilateral swap with each other".

 

 

Time to buy DAX? Buy US Dollar? 

 

I could be pre-mature but delay in Syria response virtue of ZERO backing in UK, US and in Europe among voters to engage without UN mandate is likely to delay action…..and now this liquidity provision is significant commitment from BOJ and Japan.

 

Note also that major part of this intervention have meant the Asian central banks been: Net selling US dollar & Treasuries. If my "theory" correct this would be unwound.  (Central bank has had to sell their US Dollars bonds (due to their pegs to US Dollar) – then use proceed in FX market to sell US Dollar and buy their own domestic currency)

Dont forget in November/December 2011 Federal Reserve did same for ECB:

http://www.zerohedge.com/news/fed-opens-new-fx-swap-line-bank-japan-second-after-ecb

 

It ultimately partly turned the tide - also Bank of Japan have less Asian debt on its book than during Asian crisis and with it excess savings this makes perfect sense. It will not change lack of reform and structural issues, but could buy time before the dreaded tapering clarfied. Make no mistake: Fed must be seriously concerned about their growth and overall strategy. INR and IDR both reacting positively.. (see chart)

 

 

 

 

Trading: If this above take hold we could be in for brief rally - we are still in complicated technical pattern where either this week was low or we need to test 200 MA lower down - but risk reward wise I would buy DAX here @ 8160 with stop 100 points below.

 

 

 

Med venlig hilsen  |  Best regards
Steen Jakobsen  |  Chief Economist

 

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