“If I were Bank of Japan, I would set a trap for all the currency speculators in the world. I would intervene in the currency market, appearing unsuccessfully, to lure speculators to commit more and more funds. I would get into a spit fight with the US Treasury and appear scared from time to time, egging the speculators on. I would quietly sell ¥10 trillion per day, not completely offsetting the speculative inflow and allowing dollar-yen to drop slowly with rising trading volume. I would play the game for two months and let dollar yen drop to low 60s until ¥500 trillion of speculative funds are sunk at an average price of 75. I would then announce unlimited supply of yen at 120. The speculators would suffer losses of ¥ 312 trillion instantaneously. They have to unwind their positions to stop losses. Just in case that they don’t unwind, I would announce the price would be raised to 130 one month later. I would use half of the profit to retire 16% of the national debt and donate the other half to Melinda and Bill Gates Foundation for helping Africa. I would re-float the currency, after all the speculative positions have been closed, and impose 0.1% Tobin tax on yen currency trading to stop future speculation.”
Andy Xie, 12th October, 2010, in China Finance
The above quote is the opening passage from The Absolute Return Letter for November, which focus on the state of the current currency markets.
The Absolute Return Letter, November 2010: Four Rather Sick Patients
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