A final G-20 communiqué, released after the conclusion of a summit on Saturday, has set the stage for recent trends in major currencies to resume.
While many analysts had expected the G-20 to have fired a warning shot at Japan, this didn't materialise and so we saw a rise today in the Dollar- Yen.
While many analysts had expected the G-20 to have fired a warning shot at Japan, this didn't materialise and so we saw a rise today in the Dollar- Yen.
The G-20 statement pledged not to "target our exchange rates for competitive purposes," and avoided singling out Japan. Japanese officials have recently denied that they are driving down the Yen, instead saying that the Yen's decline has been a by-product of attempts at reviving the economy.
This seems to have created an opening, that I predict could see the Japanese continue to pursue aggressive fiscal and monetary easing.
The Yen has tumbled 0.7% to 94.13 per Dollar earlier today and over the past six months has declined by 16%.
Against the Euro the Yen dropped 0.4% to 125.50 per Euro.
The Yen's decline by 14% over the past three months is mainly as a result of Japan's Prime Minister, Shinzo Abe, having announced spending rises and having pressured Japan's central bank with the aim of boosting monetary easing.
This seems to have created an opening, that I predict could see the Japanese continue to pursue aggressive fiscal and monetary easing.
The Yen has tumbled 0.7% to 94.13 per Dollar earlier today and over the past six months has declined by 16%.
Against the Euro the Yen dropped 0.4% to 125.50 per Euro.
The Yen's decline by 14% over the past three months is mainly as a result of Japan's Prime Minister, Shinzo Abe, having announced spending rises and having pressured Japan's central bank with the aim of boosting monetary easing.
For me, it seems that the main focus for the Yen now will centre around who will be appointed to replace Bank of Japan (BOJ) Governor Masaaki Shirakawa, once he steps down on the 19th of March.
Abe has said that he wants to show the government's intentions through his selection of nominees for BOJ governor and deputies soon.
The Pound dropped close to a seven-month low to the Dollar on prospects that the Bank of England (BOE) might tolerate higher inflation.
The BOE will release minutes of its February policy meeting on Wednesday. The central bank had left the target of its bond purchases unchanged and had declared that inflation is likely to accelerate further in the near term and could in fact stay above the BOE' 2% target until 2015.
It seems to me then that, the Pound is at risk of following the same path as the Yen and could be the next major currency that suffers a large scale devaluation.
Earlier today the Pound dropped by 0.3% to $1.5478.
The Euro fell by 0.2% to $1.3332, its fourth day of declines against the Dollar, ahead of Italy's looming parliamentary election, which is set for the 24th and 25th of this month.
So, the next main risk event for the Euro appears to be Italy's general election. If the outcome of that is an administration that reverses austerity, we could see risk-off moves in financial markets.
Abe has said that he wants to show the government's intentions through his selection of nominees for BOJ governor and deputies soon.
The Pound dropped close to a seven-month low to the Dollar on prospects that the Bank of England (BOE) might tolerate higher inflation.
The BOE will release minutes of its February policy meeting on Wednesday. The central bank had left the target of its bond purchases unchanged and had declared that inflation is likely to accelerate further in the near term and could in fact stay above the BOE' 2% target until 2015.
It seems to me then that, the Pound is at risk of following the same path as the Yen and could be the next major currency that suffers a large scale devaluation.
Earlier today the Pound dropped by 0.3% to $1.5478.
The Euro fell by 0.2% to $1.3332, its fourth day of declines against the Dollar, ahead of Italy's looming parliamentary election, which is set for the 24th and 25th of this month.
So, the next main risk event for the Euro appears to be Italy's general election. If the outcome of that is an administration that reverses austerity, we could see risk-off moves in financial markets.
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