What constitutes success for the world’s one-day yen policy? To minimise “excess volatility and disorderly movements in exchange rates,” if the G7 statement is anything to go by.
But then “volatility” is all a matter of time period. For instance, it has gone up over the one-day time horizon, with the very sharp weakening of the yen since central bank intervention began this morning. “Disorder” gives a little more wiggle room because it is defined by its effects. It might include, for instance, exchange rate movements that lead to a credit crunch. (One wonders, though, whether a rapid weakening of the yen would also have been classed as “disorderly”.)
Some pundits are saying the G7 action is at least partly self-interested. Certainly their participation is likely to cost them: their domestic currencies will appreciate, and the trades themselves are very likely to lose money as the yen eventually rebounds. Perhaps the tumbling Nikkei – and stocks elsewhere following – made these costs seem smaller. Success in these terms has been achieved – for today. American, European and British equities have gained today.
Other commentators suggest the moves are about defeating the speculators. If we could Read more
The Group of Seven industrialised nations have agreed to co-ordinated currency intervention for the first time in a decade to help Japan recover from its devastating earthquake, tsunami and nuclear crisis.
Authorities in Japan, the eurozone, the UK, Canada and the US agreed on Friday to help weaken the yen in a rolling intervention that began at 9am in Tokyo, which immediately pushed the yen down from above Y79 against the US dollar to below Y81. Read more
Here in DC waiting for the G20 central bank governors and finance ministers meeting to end. There have been no actual cries of pain and bodies thrown out of the room as yet, but I think it’s safe to say that agreement over the vexed issue of taxes on banks’ balance sheets and/or profits is not going to be resolved this weekend. The Canadians at least have some moral authority on their side when they point out that their banks didn’t fail during the crisis, so why should they adopt the preferred solution of those whose banks did?
One thing strikes me, though. As we all know, the baton of global governance has passed from the G7 to the G20, sign of the rising power of Asia and Latin America, etc, etc. But this subject – the one that is most vexing and dividing them at the moment, except perhaps exchange rates – is a pure G7 issue. Few other countries’ banking sectors are big and developed enough to try to steal business from London or New York or Frankfurt or Paris or Tokyo as a result of new bank taxes, and those that might conceivably be – Singapore, Switzerland – aren’t in the G20 either. The G20: not a governance panacea. Who’d a thought it?
Extreme summitry provokes extreme events – a less-than-serious comment from Jean-Claude Trichet, ECB president. He told today’s press conference was looking forward to travelling this weekend to Iqaluit, in frozen north Canada, for a gathering of G7 finance ministers and central bank governors. “We will have the right environment to be as cool as possible,” he said.
The G7 communique urges China to let its currency appreciate. The logic of the G7′s position is fine, says Chris Giles of the Financial Times, but it has said it before, China does not agree, and so it is an entirely toothless statement. Read more
The G7 is dying as finance ministers and central bank governors prepare to meet in Istanbul tomorrow. Officials are giving obituaries, but the G7 will have a last hurrah writes Chris Giles of the Financial Times. Canada has had a tantrum and insisted the baton does not pass to the G20 until it has had its turn in the chair next year. Read more