G-7 nations considering issuing statement on currencies: report
By William L. Watts, MarketWatch
NEW YORK (MarketWatch) — The U.S. dollar rose against the Japanese yen and other major currencies on Monday following reports that the Group of Seven nations was considering whether to issue a statement aimed at averting a so-called global currency war.
Tension in currency markets has escalated recently following efforts by Japan’s government to buoy its economy and end deflation. Japanese officials say they are not manipulating the yen, but their efforts have resulted in a sharp weakening of the Japanese currency — which makes its exports more competitive abroad.
Two officials from the Group of 20 told Reuters that a G-7 statement reaffirming the commitment to market-determined exchange rates could be released ahead of the meeting of G-20 finance ministers and central bankers in Moscow on Friday and Saturday.
The Wall Street Journal on Saturday reported that officials from the G-7 nations — the U.S., Canada, Japan, U.K., Germany, France and Italy — had been in talks last week over a possible statement.
The ICE dollar index DXY +0.19% , a measure of the dollar’s performance against a basket of six major rivals, traded at 80.345 in recent trade, up from 80.234 in North American action late Friday.
The WSJ Dollar Index XX:BUXX +0.18% , which is based on a slightly wider basket, rose 0.22 point to 71.72.
The dollar posted notable gains against the Japanese yen and the British pound. The greenback USDJPY +0.7038% bought 93.31 yen, up from ÂĄ92.75, while the British pound GBPUSD -0.8282% slipped to $1.5667 from $1.5794.
The Australian dollar AUDUSD -0.3259% changed hands at $1.0273, down from $1.0317.
Euro-zone meeting
The euro EURUSD +0.3360% bought $1.3378, paring intraday gains. It traded at $1.3365 late Friday.
Bullish “euphoria” toward the euro faded last week after European Central Bank President Mario Draghi said policy makers would watch the shared currency’s appreciation for signs it was affecting the bank’s inflation outlook and repeatedly emphasized the ECB’s “accommodative” monetary policy, noted strategists at Lloyds Bank in London.
A meeting of euro-zone finance ministers later Monday is expected to focus on prospects for an aid program for Cyprus but appears unlikely to stir much market reaction, they said in a note. However, “there remains plenty of uncertainty surrounding the Italian elections which could further weigh on the euro over the coming weeks,” they wrote.
With the Feb. 24-25 elections in Italy now less than 15 days away, polling is banned. The final round of surveys published Friday showed the gap between the leading candidate, center-left politician Pier Luigi Bersani, and former premier Silvio Berlusconi at around 5 to 7 percentage points, noted Elsa Lignos, currency strategist at RBC Capital Markets.
That would translate into a win in the lower house for Bersani, who is seen as likely to stick with a controversial economic-policy overhaul initiated by technocratic Prime Minister Mario Monti. Bersani could potentially team up with a group of candidates backing Monti.
“Market preferences appear to be Bersani/Monti coalition, followed by outright Bersani, followed by hung parliament,” Lignos said.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
