Dollar Falling Against Yen: Intervention Coming?

Things are looking depressing in the exchange rate between the U.S. Dollar (USD) and the Japanese Yen (JPY).

I went over to the Universal Currency Converter and did not find any good news on the current rate of exchange between the dollar and yen.

Here's the rate:

1.00 USD = 84.2395 JPY

A strong yen against the dollar is really not good news for Japan, who relies upon exports to foreign markets. This is putting pressure on Japan to intervene.

According to an article in The Wall Street Journal yesterday:

TOKYO—Data released Wednesday on the growth of the global foreign-exchange market shows that if Japan tries to intervene to stop the yen's rise, it will face a much larger task than it did in 2004, when it last waded into the market.

The latest triennial report from the Bank for International Settlements shows that trading between the U.S. dollar and the yen, almost certain to be the target of any intervention, has nearly doubled between April 2004 and April 2010, soaring to an average daily turnover of $568 billion from $328 billion.

"Compared with before, it's now more difficult to manage or manipulate the market because it's grown so much," said Minoru Shioiri, chief manager of foreign-exchange trading at Mitsubishi UFJ Morgan Stanley Securities.

The report comes as Tokyo faces pressure to do more to curb the yen. The dollar fell to a 15-year low of 83.58 yen last week. In early Wednesday afternoon trading in New York, the dollar was at 84.48 yen, up from 84.01 late Tuesday. The stronger local currency makes Japanese products less competitive overseas and diminishes the size of overseas income repatriated to Japan.

Of course, a strong yen against the dollar means that American tourists would be getting less yen per dollar, making a vacation to Japan more expensive. This is detrimental to Japan's tourist industy. But, on the other side of the coin, this makes a vacation to the United States a bargain for Japanese tourists.

Keep in mind that I got an exchange rate of 116 yen for every dollar I exchanged back in April 2007.

To see the full WSJ article, go here.