The G7 is meeting tonight to discuss potential market operations in the event that the situation in Japan and the Middle East worsen and the financial system begins to falter.
The strong yen does not create all that much of a problem yet for Japan, and it does have the benefit of easing their needs to purchase imported energy and supplies. The bigger problem might be for global financial institutions who are not properly hedged to the yen at these previously unthinkable highs.
I do think that more intervention in the markets in terms of buying support is likely, and the central bankers will play their usual games along with the primary banks' trading desks.
The situation in Japan with regard to the reactors is not yet resolved, and there are still follow on earthquakes which complicates the situation. There remains the possible for wider spread damage and loss of life.
Once that situation is resolved, the disruption to their infrastructure and supply chains will be their biggest challenges. Do not underestimate the severe damage that has been done to their electrical infrastructure generating capacity.
So, let's see what happens. The US indices stopped almost dead on their key support levels and tomorrow is options expiration. The capping in gold and silver has been almost continuous. It is interesting to see the pair trade of long bullion and short stocks working again. This tells us something of the nature of the market.
