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Yen Surges After G7 Clarifies Earlier Statement; USD/JPY Tanks

Christopher Vecchio

THE TAKEAWAY: G7 Official Clarifies Earlier Statement on Japanese Yen, Noting Intention to Condemn Japan for Recent Excessive Depreciation at G20 Meeting

Earlier today, G7 officials released the following statement:

“We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets. We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate.”

Initially, this provoked further Yen weakness; Japanese Finance Minister Taro Aso told reporters in Tokyo that the G7 was acknowledging Japan’s policies in context of “reflation,” to help the Japanese economy grow. Apparently, he was dead wrong.

A few minutes ago, a G7 official came out to clarify the aforementioned statement, released earlier, on the basis it seems the market – the same one which determines exchange rates – was wrong in its interpretation. In fact, the official went on to say that the G7 is concerned about the excessive weakness in the Yen, and that recent Japanese policies would be a main talking point at the G20 meeting this week in Moscow, Russia.

USDJPY 1-minute Chart: February 12, 2013

Yen_Surges_After_G7_Clarifies_Earlier_Statement_USDJPY_Tanks_body_Picture_1.png, Yen Surges After G7 Clarifies Earlier Statement; USD/JPY Tanks

Charts Created using Marketscope – Prepared by Christopher Vecchio

As a result, the USDJPY cratered, falling from 94.25 to 93.25 in the span of 2-minutes. While it has since recovered back to 93.87, it is quite ironic that, in an effort to soothe excessive moves in the Yen, the G7 has in fact stoked excessive moves in the Yen.

--- Written by Christopher Vecchio, Currency Analyst

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