G7 has no plans for intervention.
If dollar shows continued weakness going into Monday am
then perhaps we will see renewed selling.
quote.bloomberg.com
Washington, Sept. 25 (Bloomberg) -- The yen's appreciation
is a concern, although for now it's up to the Japanese to drive
down their currency's value, finance ministers and central
bankers from the Group of Seven leading industrial nations said.
``We will continue to monitor developments in exchange
markets and cooperate as appropriate,' the G-7 ministers said in
a statement, matching word for word the declaration after the
last G-7 meeting in February.
The yen's 17 percent rise against the dollar and the euro in
the past three months makes Japanese exports more expensive and
threatens the country's recovery from its worst recession since
World War II. Still, the statement suggests the G-7 countries --
the U.S., Japan, Germany, France, the U.K., Italy and Canada --
aren't prepared to immediately engage in a joint effort to weaken
the yen.
Italian Treasury Minister Giuliano Amato told reporters
after the one-day meeting that the ``G-7 does not rule out
intervention as an instrument of cooperation. They're not saying
they will intervene, and they're not saying they won't.'
Even so, the G-7's stand-pat move should send the yen higher
against the euro and the dollar, analysts said. ``We think the
yen will jump like a rocket,' said Carl Weinberg, chief
economist at High Frequency Economics Ltd. in Valhalla, New York.
The yen closed at 104.18 to the dollar on Friday.
Shares Japan's Concern
In their final communique, the G-7 leaders said ``we share
Japan's concern about the potential impact of the yen's
appreciation for the Japanese economy and the world economy.'
``Japanese authorities reiterated their intention to
implement stimulus measures until domestic demand-led growth is
solidly in place and, in the context of their zero interest-rate
policy, to provide ample liquidity until deflationary concerns
are dispelled,' according to the statement issued after a
meeting lasting more than five hours at the Decatur House near
the White House.
Mention of the yen in the statement was unusual. The G-7 has
in the past avoided mentioning individual currencies.
The April, 1995 G-7 statement calling for an ``orderly
reversal' of exchange rates did not specifically mention the
dollar or yen, though the statement was precipitated by the
dollar's fall to 80.63 yen.
Some officials at Japan's Ministry of Finance floated the
idea of coordinated yen sales by the U.S. and possibly other G-7
countries in the days before the meeting.
Hour-Long Meeting
An hour-long meeting between Japanese Finance Minister
Kiichi Miyazawa and U.S. Treasury Secretary Lawrence Summers this
morning at the Treasury Department didn't produce even the usual
statement that both sides had agreed to monitor developments in
exchange markets and cooperate as necessary.
Interventions, once widely used to manipulate currency
values, have fallen into disfavor. The last time the U.S. joined
with Japan to intervene in currency markets was June 18, 1998,
when they sold dollars for yen to prop up the Japanese currency,
which had fallen to 147 to the dollar. European countries haven't
joined in a G-7 intervention in four years.
One reason the ministers are in no hurry to help Japan sell
yen is that while much of East Asia may be relying on a Japanese
economic rebound for the investment and trade it would bring, the
U.S. and Europe are not.
European Central Bank council member Otmar Issing said
yesterday that European policy-makers aren't much concerned about
the effect of exchange rates on trade because the 11-nation euro
area's dependence on commerce outside the region is shrinking.
And while the U.S. deficit with Japan widened in July to a
record $6.8 billion from $6.3 billion in June, that trade gap has
had little impact on domestic growth and is not the politically
charged issue it once was.
Although the U.S. hasn't changed its policy of favoring a
strong dollar, Summers said last week the yen's rise won't slow
U.S. growth. ``The basic momentum of our expansion should be
maintained,' he said.
Growth Prospects
European countries, looking to jump start stagnant growth on
the continent, have benefited from the stronger yen, which makes
European products more competitive. Germany, Europe's biggest
economy, reported a 3.3 percent rise in overseas orders in July.
The euro's current exchange rate is ``appropriate,'
Bundesbank President Ernst Welteke said earlier this month,
``because it doesn't hamper strengthening demand from abroad but
it also doesn't pose any threats for price stability at home.' |
