Saturday, October 6, 2007

Japanese Forex Reserves Near $1 Trillion


Japan's Central Bank now controls over $950 Billion in foreign exchange reserves, second only to those of China. While Japan is not accumulating significant new reserves, its existing reserves have appreciated in value due to the Euro's recent ascent. Analysts are keeping a close eye on the reserves of both countries, which represent close to 50% of the world's foreign exchange reserves. In addition, analysts will be watching China, which may take a cue from Japan and diversify some of its reserves into Euro-denominated assets in order to offset the effect of the declining Dollar. AFX News Limited reports:

Japan's reserves are closely watched for evidence of how the country is managing its foreign currency holdings. Its actions are seen as having a significant impact on exchange rates and bond markets around the world, particularly the US government bond market.

Korean Won Benefits from Falling Dollar

It seems the collapse of the USD is quickly spreading; the Korean Won has become the latest currency to cash in on the sagging Dollar. As with regard to other currencies that have risen against the Dollar, forex analysts are not attributing the Won's rise to strength in the Korean economy, but rather weakness in the US economy. It is also worth noting that previously, when the Won rose sharply against the Dollar, the Korean government moved quickly to intervene in forex markets in a vane attempt to protect the export-dependent Korean economy. However, as the Won inevitably continued to rise, the government incurred massive losses, essentially for naught. As a result, analysts expect the Korean government to remain on the sidelines this time around. The Korea Times reports:

"Other than verbal intervention, it will be difficult for the government to actually meddle in the market to help stop the won's appreciation."

Read More: Dollar's Demise Means Mightier Won

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