Thursday, 28 February 2013

Canada Dollar Falls on Speculation GDP Contracted

By Ari Altstedter - Feb 28, 2013 10:38 PM GMT+0400

The Canadian dollar weakened to lowest level in eight months as the nation’s trade deficit narrowed less than forecast, adding to speculation a report tomorrow will show the economy contracted in December.
The currency fell against the majority of its most-traded peers after a report showed economic growth in the U.S., Canada’s largest trading partner, was less than forecast in the fourth quarter. Canadian gross domestic product shrank 0.2 percent in December, resulting in fourth quarter growth holding steady at 0.6 percent, according to the median estimates of two Bloomberg News surveys.
Feb. 27 (Bloomberg) -- David Bloom, global head of currency strategy at HSBC Holdings Plc, talks about the possible impact of a faster U.S. economic recovery on Group-of-10 and emerging-market currencies. He spoke with Bloomberg's Niki O'Callaghan in London on Feb. 21. (Source: Bloomberg)
“The weakness was largely drive off the disappointment from the GDP data in the U.S. coming out much softer than expected,” said Mazen Issa, Canada macro strategist at Toronto- Dominion Bank’s TD Securities, by phone from Toronto. “Heading into the release tomorrow the dollar’s decline today certainly reinforces the theme of universal softness in tomorrow’s GDP report.”
The loonie, as the Canadian dollar is known for the image of the water fowl on the C$1 coin, fell 0.6 percent to C$1.0293 perU.S. dollar at 1:30 p.m. in Toronto. The currency earlier reached C$1.0309, its lowest since June 29. One loonie buys 97.15 U.S. cents.
The currency is down 3.1 percent in February, on pace for a second consecutive monthly decline and the biggest drop since May.
Canada’s benchmark 10-year bond rose, with yields falling two basis points, or 0.02 percentage point, to 1.85 percent. The 2.75 percent security maturing in June 2022 gained 14 cents to C$107.64.

Relative Strength

A technical measure has suggested the loonie will soon reverse direction for the last seven trading days. The 14-day relative strength index against the U.S. dollar has been below 30 percent since Feb. 20. The measure is at 29.4 percent today.
The nation’s trade deficit shrank to C$17.3 billion ($16.9 billion) in the fourth quarter, compared to the C$17 billion deficit forecast in the median of Bloomberg survey of 18 economists.
“We have expectation building into tomorrow’s expectedly weak Canadian data development,” said Greg T. Moore, a currency strategist at Toronto-Dominion Bank (TD), in phone interview from Toronto. “We had the current account data miss expectations and that’s certainly not positive.”
Industrial production in Canada was flat in January, according to a separate report fromStatistics Canada, missing the 0.3 percent growth forecast in the median of a Bloomberg survey of 11 economists.

12-Month Decline

The U.S. economy barely expand in the fourth quarter, erasing a previously estimated contraction, with 0.1 percent annual growth, figures up from a previously estimated 0.1 percent drop, according to Commerce Department data.
The loonie has fallen 1.5 percent this year among the 10 developed-nation currencies tracked by the Bloomberg Correlation-Weighted Index. The greenback gained 2.5 percent and the Japanese yen lost 4.7 percent.
“We’ve got the GDP data tomorrow and the Bank of Canada next week, so I think what we’ve got in general is a market that is relatively cautious to the Canadian dollar,” said David Watt, chief economist at the Canadian unit of HSBC Holdings Plc, by phone from Toronto.
The next Bank of Canada interest-rate decision will take place on March 6.
To contact the reporter on this story: Ari Altstedter in Toronto at
To contact the editor responsible for this story: Dave Liedtka at

Monday, 25 February 2013

Yen Drops to Near 3-Year Low on BOJ Bets; Pound Slides

By Anchalee Worrachate & Candice Zachariahs - Feb 25, 2013 12:31 PM GMT+0400

The yen fell to the weakest level since May 2010 against the dollar as Japan’s government narrowed down candidates to run the central bank and pursue the prime minister’s plan for expanded monetary stimulus.
The currency declined against all its 16 major counterparts after an official said Prime Minister Shinzo Abe is likely to nominate Asian Development Bank President Haruhiko Kuroda for Bank of Japan (8301) governor. The pound dropped for a second day against the euro after Moody’s Investors Service cut the U.K.’s credit rating. Australia’s dollar fell after a gauge of Chinese manufacturing came in below economists’ estimates.
Asian Development Bank President Haruhiko Kuroda Haruhiko Kuroda, president of the Asian Development Bank (ADB). Photographer: Kiyoshi Ota/Bloomberg
“The market seems to have formed an opinion that Kuroda is a dove and if he indeed becomes the new BOJ governor, he would be willing to do much more to support growth,” saidGeoffrey Yu, a senior currency strategist at UBS AG in London. “The yen is weakening on speculation there will be more policy easing.”
The yen weakened 0.8 percent to 94.12 per dollar as of 8:26 a.m. in London after sliding to 94.77, the weakest level since May 5, 2010. Japan’s currency depreciated 1 percent to 124.50 per euro. The euro rose 0.3 percent to $1.3227.
The yen has tumbled 6.9 percent this year, the biggest decline among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The pound has the second biggest loss, sliding 5.8 percent.
Abe is likely to choose Kikuo Iwata, an academic who has advocated increasing Japan’s monetary base, and Hiroshi Nakaso, a senior BOJ official, as deputy governors, according to a government official with knowledge of the discussions who asked not to be named as the talks are private. Japanese media reported on the nominations earlier.

Reshape BOJ

The prime minister is set to reshape the leadership of the BOJ that has adopted his 2 percent inflation target and plans to begin open-ended asset purchases next year. Current Governor Masaaki Shirakawa and two deputies will step aside on March 19.
Japan’s central bank has “really substantial room” for further loosening and additional measures could be justified this year, Kuroda said in a Feb. 11 interview. Former BOJ Deputy Governor Kazumasa Iwata and Kuroda were seen as leading candidates to head the bank, the Mainichi newspaper reported last week without citing anyone.
“While it is well known that Kazumasa Iwata is the most yen-negative governor candidate, a combination of Governor candidate Haruhiko Kuroda and Deputy Governor candidate Kikuo Iwata would be just as yen negative,” Citigroup Inc. analysts wrote in a report dated Feb. 22.

Pound Falls

The pound slid the weakest since July 2010 versus the dollar after Moody’s cut the U.K.’s rating by one level to Aa1 on Feb. 22, citing weakness in the nation’s growth outlook and challenges to the government’s fiscal consolidation program.
“We’ve been expecting the U.K. to get downgraded this year,” Michael Amey, a money managerat Pacific Investment Management Co. in London, wrote in an e-mailed response to questions. While the impact on gilts will be limited, the pound’s decline “is a symptom of the challenge of deleveraging the U.K. economy,” he wrote.
The pound fell 0.3 percent to 87.29 pence per euro after depreciating to 87.75, the weakest since October 2011. Sterling dropped 0.1 percent to $1.5152 after slipping to $1.5073, the lowest since July 13, 2010.
The Australian dollar declined against all except one of its 16 major peers after an industry gauge indicated China’s manufacturing may expand at a slower pace this month. China is Australia’s biggest trading partner.
The preliminary reading of a Purchasing Managers’ Index was at 50.4 in February, HSBC Holdings Plc and Markit Economics said. That compares with the 52.3 final reading for January. A number above 50 indicates expansion.
“It’s a surprisingly softer number, suggesting that the Chinese economy is pulling back a little,” said Greg Gibbs, a senior currency strategist at Royal Bank of Scotland Group Plc in Singapore. “It has contributed to some softness in the Australian dollar.”
The so-called Aussie fell 0.3 percent to $1.0289 after dropping to $1.0222 on Feb. 21, the lowest since Oct. 15.
To contact the reporters on this story: Anchalee Worrachate in London at
Candice Zachariahs in Sydney at;
To contact the editor responsible for this story: Paul Dobson at

Most European Stocks Rise on BOJ Speculation, Italy Vote

By Namitha Jagadeesh - Feb 25, 2013 2:09 PM GMT+0400

Most European stocks gained amid speculation Japan may appoint a central bank chief who favors stimulus and as investors awaited the result of Italy’s elections. Asian shares and U.S. index futures rose.
BP Plc advanced 1.5 percent after a report the U.S. may consider an offer to settle oil-spill claims. PostNL NV (PNL) climbed the most in a month as earnings beat estimates. Reckitt Benckiser Group Plc slid the most in nine months after a U.S. regulator gave two manufacturers approval to produce generic versions of its Suboxone heroin-dependency treatment.
Most European Stocks Rise Amid BOJ Speculation, Italian Election A financial trader uses a telephone as he monitors data on his computer screens in front of a display of the DAX Index curve at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
The Stoxx Europe 600 Index (SXXP) increased 0.2 percent to 288.99 at 10:09 a.m. in London, as two shares advanced for each one that fell. The equity benchmark is on course for a ninth month of gains, the longest winning streak since 1997, as U.S. lawmakers agreed on a compromise budget and European Central Bank President Mario Draghi pledged to defend the euro.
“Having a pro-stimulus Bank of Japan governor can be good on a short-term basis because we all know Japan needs negative real interest rates,” said Pierre Mouton, who helps oversee $6 billion as portfolio manager at Notz, Stucki & Cie. in Geneva. “The very good U.S. markets also help explain why European stocks are up today. With the Italian elections, investors are certainly hoping for the status quo.”
The MSCI Asia Pacific Index rose 0.5 percent today, while futures on the Standard & Poor’s 500 Index (SPX) added 0.2 percent. The S&P 500 rallied 0.5 percent on Feb. 22 as company earnings beat analysts’ estimates.
The volume of shares changing hands in Stoxx 600 companies was 28 percent less than the 30-day average, data compiled by Bloomberg show.

BOJ Nomination

In Japan, Prime Minister Shinzo Abe will probably nominate Asian Development Bank President Haruhiko Kuroda as Bank of Japan governor, two government officials with knowledge of the discussions said. Kuroda said earlier this month additional monetary easing can be justified for 2013.
Kuroda “has a lot of experience in international finance at the ADB and elsewhere,” Finance Minister Taro Aso told reporters in Seoul today.
Pollsters will release initial estimates of the Italian election results after 3 p.m. in Rome today. Incumbent Mario Monti and front-runner Pier Luigi Bersani of the Democratic Party have vowed to maintain budget rigor, while Silvio Berlusconi and Beppe Grillo have promised to stop tax increases.
The U.K. lost its top credit rating from Moody’s Investors Service, which cited weakness in the country’s growth outlook and challenges to the government’s fiscal consolidation program. Moody’s said late Feb. 22 that it lowered the rating one level to Aa1 from Aaa and changed the outlook on the nation’s debt to stable from negative.

China Economy

In China, the preliminary reading of a Purchasing Managers’ Index was 50.4 in February, according to HSBC Holdings Plc and Markit Economics. That compared with the 52.3 final reading for January and the 52.2 median estimate of 11 analysts surveyed by Bloomberg. A number above 50 indicates growth.
Euro-region stocks are missing this year’s global rally as the correlation between the Euro Stoxx 50 Index and the MSCI All-Country World Index of 45 developed and emerging markets has fallen to 77 percent. That’s the lowest level since the collapse of Lehman Brothers Holdings Inc. in 2008, according to data compiled by Bloomberg.
BP gained 6.45 pence to 450.5 pence as a U.S. trial over the 2010 Gulf of Mexico oil spill begins today. The U.S. and Gulf states are considering a $16 billion accord with BP over pollution fines and natural-resource damages claims, the Wall Street Journal reported on Feb. 22, citing unidentified people familiar with the matter.

BP Trial

Scott Dean, a spokesman for BP, declined to comment, as did Joy Patterson, a spokeswoman for Alabama Attorney General Luther Strange, and Amanda Larkins, spokeswoman for Louisiana Attorney General Buddy Caldwell.
PostNL advanced 6.2 percent to 1.96 euros, the biggest gain since Jan. 21, after reporting fourth-quarter earnings before interest and taxes of 219 million euros ($290 million). That beat the 144 million-euro average analyst forecast in a Bloomberg survey.
TNT Express NV rose 2.5 percent to 5.70 euros after saying it plans to name Tex Gunning as chief executive officer as of June 1, pending shareholder approval. Gunning is currently head of the decorative paints unit of Akzo Nobel NV.
Elan Corp. surged 8.5 percent to 8.65 euros, a three-month high. RP Management LLC, an investor in royalty streams from pharmaceuticals, said it’s willing to buy the Irish drugmaker for about $6.5 billion.

Reckitt Retreats

Reckitt Benckiser slid 4 percent to 4,334 pence, the biggest drop since May, after saying two unnamed manufacturers received approval from the U.S. Food and Drug Administration to produce generic Suboxone tablets in the world’s largest economy.
The drug faces generic competition after losing U.S. patent protection in 2009, which Reckitt Benckiser has said would eliminate as much as 90 percent of tablet revenue and about 20 percent of the film-strip version.
Pearson Plc (PSON) retreated 3.1 percent to 1,178 pence after saying it expects tough market conditions to continue this year. The publisher of the Financial Times newspaper forecast 2013 operating profit will be in line with 2012, when earnings fell.
To contact the reporter on this story: Namitha Jagadeesh in London
To contact the editor responsible for this story: Andrew Rummer at

Monday, 18 February 2013

European Stocks Fall as Metals Slide; Yen Drops on G-20 Meeting

By Matthew Brown & Jason Clenfield - Feb 18, 2013 3:41 PM GMT+0400

European stocks fell for a third day and industrial metals slid, while the yen weakened after the Group of 20 nations refrained from censuring Japan’s currency policy.
The Stoxx Europe 600 Index lost 0.3 percent as of 11:31 a.m. in London. Standard & Poor’s 500 Index futures added less than 0.1 percent, with U.S. markets closed today for a holiday. Copper, nickel and aluminum dropped at least 1 percent as China, the biggest industrial metals consumer, reopened after a week- long holiday. The yen weakened 0.5 percent to 94.0 per dollar, while Japanese shares surged 2.2 percent, helping the MSCI Asia Pacific Index of stocks toward an 18-month high.
European Stocks Fall as Metals Slide A financial trader monitors data on computer screens at the Frankfurt Stock Exchange in Frankfurt. Photographer: Ralph Orlowski/Bloomberg
Yen Weakens as G-20 Refrains From Censuring Japan; Silver Gains The yen has weakened as Prime Minister Shinzo Abe campaigned for looser monetary policy to revive an economy plagued by 15 years of deflation and three recessions in the past five years. Photographer: Tomohiro Ohsumi/Bloomberg
Yen Weakens as G-20 Refrains From Censuring Japan
Two days of talks between G-20 finance ministers and central bankers ended in Moscow with a statement pledging not to "target our exchange rates for competitive purposes," without singling out Japan. Photographer: Yuri Kadobnov/AFP via Getty Images
G-20 finance ministers and central bankers ended talks in Moscow on Feb. 16 pledging not to “target our exchange rates for competitive purposes,” without singling out Japan, where the yen tumbled almost 14 percent against the dollar in three months. An Italian parliamentary election starts Feb. 24 in which former Prime Minister Silvio Berlusconi is running. Bunds rose on speculation European Central Bank President Mario Draghi will hint at a possible interest-rate cut when speaking to lawmakers today.
“This is a pause, but it’s a logical move after the rally we’ve had,” Philippe Gijsels, head of fixed-income research at BNP Paribas Fortis in Brussels, said in a phone interview today. “The market has chosen to focus on the Italian elections as an excuse to take some risk off the table.”

Carlsberg, Natixis

The MSCI Asia Pacific Index gained as much as 0.8 percent to 133.93 after reaching 134.06 Feb. 14, the most since August 2011. The benchmark trades at 14.8 times estimated earnings compared with 13.7 for the S&P 500 and 12.3 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.
Two shares declined for every one that rose in the Stoxx 600, which was on course for the longest losing streak in a month.Carlsberg A/S tumbled 7 percent, the most in more than six months, as the brewer scrapped its medium-term profitability goal amid increasing costs for making beer and expenses for changes to product buying and logistics. Natixis SA surged 27 percent, the biggest gain since August 2009, as the French investment bank said it plans a 2 billion-euro ($2.67 billion) payment to shareholders.
In Japan, Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. advanced more than 4 percent.
The yen fell against all 16 of its major peers, extending losses that made it the worst-performing major currency in the past three months. South Korea’s won climbed as much as 0.7 percent to 8.71 yen, the highest since October 2008.

Pound Weakness

Japanese officials in Moscow denied driving down their currency, arguing that its weakness was a byproduct of their effort to revive the world’s third-largest economy, which would benefit trading partners. The fact the G-20 communique didn’t single out Japan means the yen may weaken toward 100 per dollar in the next few months, UBS AG said in a report.
The pound fell as much as 0.5 percent to $1.5438, the lowest level versus the dollar in more than seven months, after Bank of England policy maker Martin Weale said that U.K. exports may benefit from the currency’s decline.
The euro declined as much as 0.3 percent to $1.3322, falling for a fourth day, ahead of Italy’s parliamentary election on Feb. 24 to Feb. 25. Berlusconi had 27.8 percent support in an SWG Institute survey published Feb. 8, compared with 33.8 percent for Pier Luigi Bersani, his main rival.

Saudi Exports

German 10-year bund yields dropped four basis points to 1.62 percent. Equivalent-maturity Italian yields climbed four basis points to 4.43 percent.
Brent crude for March delivery rose 0.1 percent to $117.77 per barrel after a report from the Joint Organisations Data Initiative showed Saudi Arabia exported 7.06 million barrels of oil a day in December, the least since September 2011. WTI crude dropped 0.3 percent to $95.60 per barrel.
Industrial metals declined, with aluminum retreating 1.2 percent from a six-week high to $2,143 a metric ton. Copper fell 1 percent, while nickel slid 1.7 percent.
Spot gold advanced as much as 0.6 percent to $1,618.9 an ounce as prices at the cheapest in six months lured buyers. Silver and platinum added at least 0.5 percent.
Assets in exchange-traded products holding gold dropped 0.5 percent last week, the biggest drop in almost seven months after billionaires George Soros and Louis Moore Bacon cut their stakes in SPDR Gold Trust, the biggest fund backed by the metal.
The MSCI Emerging Markets Index fell 0.3 percent to 1,063.71, snapping a four-day winning streak. EasTone Telecommunications Co. slid the most since July 24 in Taipei, leading losses, after Barclays Plc downgraded the stock. PT Bumi Resources surged 9.4 percent to the highest level since Aug. 24 after Nurhaida, a commissioner at Indonesia’s Financial Services Authority, said today change in ownership control of the company would require a tender offer.
To contact the reporters on this story: Matthew Brown in London at; Jason Clenfield in Tokyo at
To contact the editor responsible for this story: Stuart Wallace at

G-20 Signals Support for Japan Easing Without Yen Talk

By Simon KennedyToru Fujioka & Raymond Colitt - Feb 18, 2013 9:29 AM GMT+0400

Global finance chiefs signaled Japan has scope to keep stimulating its stagnant economy as long as policy makers cease publicly advocating a sliding yen.
The message was delivered at weekend talks of finance ministers and central bankers from the Group of 20 in Moscow. While they pledged not “to target our exchange rates for competitive purposes,” Japan wasn’t singled out for allowing the yen to drop and won backing for its push to beat deflation.
G-20 Signals Support for Japan Easing Without Yen Loose Talk
Taro Aso, Japan's deputy prime minister and finance minister. Photographer: Haruyoshi Yamaguchi/Bloomberg
Feb. 16 (Bloomberg) Australian Treasurer Wayne Swan talks about the Group of 20's stance on currency exchange rates. Swan, speaking with Bloomberg's Ryan Chilcote at a G-20 meeting in Moscow, also discusses efforts to prevent corporations from shifting profits between countries to avoid taxes. (Source: Bloomberg)
Feb. 16 (Bloomberg) -- Japanese Finance Minister Taro Aso speaks about his country's currency policy. He speaks with Bloomberg's Ryan Chilcote at a G-20 meeting in Moscow. (Source: Bloomberg)
U.S. Fed Chairman Ben Bernanke
Ben Bernanke, chairman of the U.S. Federal Reserve, attends the Group of 20 meeting in Moscow on Feb. 16, 2013. He said Feb. 15 that the U.S. has deployed “domestic policy tools to advance domestic objectives,” adding that bolstering the U.S. economy will support world growth. Photographer: Yuri Kadobnov/AFP/Getty Images
“There was no censure of the Japanese attitude, which was considered a policy to develop its economy and not to intentionally devalue,” Brazilian Finance Minister Guido Mantegatold reporters after the meeting.
The yen extended its losses against the dollar today as Prime Minister Shinzo Abe told parliament that buying foreign bonds is a monetary policy option and the law governing the central bank may be revised if it fails to get results. Investors are focused on the choice for a successor to Bank of Japan Governor Masaaki Shirakawa, who steps down next month, with Abe vowing to signal the government’s intentions through his pick.
“Abe should be able to continue his push for monetary easing,” said Hiroaki Muto, senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “Foreign bond purchases by the BOJ may be a difficult policy to implement, however, as it could be interpreted as currency intervention.”
The Japanese currency was 0.5 percent weaker at 2:21 p.m. in Tokyo at 93.97 per dollar. Stocks rose, with the Topix Index gaining 2.1 percent to rebound from its first weekly loss since November.

Abe’s Campaign

Japanese officials in Moscow denied driving down their currency, arguing that its weakness was a byproduct of their effort to revive the world’s third-largest economy, which would benefit trading partners.
The yen has fallen more than 13 percent in the past three months as Abe campaigned for looser monetary policy to boost an economy plagued by 15 years of deflation. Since Abe won elections in December, the BOJ has agreed to a 2 percent inflation target and to make open-ended asset purchases from 2014.
“If they do not take responsibility and produce results, we must push ahead with the BOJ law change,” Abe said today in parliament. He said that buying foreign bonds “exists as one idea” for monetary policy.
The prime minister has to announce his nominees for a new central bank governor and deputies by March 9, Deputy Chief Cabinet Secretary Hiroshige Seko said on public broadcaster NHK yesterday.

Rating Reaffirmed

Standard & Poor’s today reaffirmed Japan’s sovereign debt rating, saying that Abe’s polices will be “critical” to stop a prolonged decline in the nation’s credit standing. The rating was kept at AA-, the fourth highest level, with a negative outlook,
“It will take a while for exports to increase on the back of a weaker yen,” said Tomo Kinoshita, an economist with Nomura Holdings Inc. in Tokyo, which today reaffirmed a forecast it made on Feb. 14 for a 2 percent expansion for Japan’s economy in the fiscal year starting April.
The government estimates an expansion of 2.5 percent next fiscal year. Gross domestic product shrank an annualized 0.4 percent in the last quarter, the Cabinet Office in Tokyo said on Feb. 14.
The Bank of Japan’s measures “have been and will remain” targeted at achieving a “robust economy through stable prices,” BOJ Governor Masaaki Shirakawa said in Moscow. The G-20 statement is “absolutely in the same spirit of our monetary policy,” he said.

Yen, Stocks

Finance Minister Taro Aso said today in parliament that the yen’s fall and gains in stocks are a result of monetary policy, declining to comment on foreign exchange. In the same parliamentary session, Abe said there’s no reason to make specific comments on the currency.
Australian Treasurer Wayne Swan told Bloomberg Television that meddling with currency values hurts economic growth.
“Market-based exchange rates, fiscal and monetary policies supporting jobs and growth -- that’s the core of the G-20 agenda,” Swan said. “To have people artificially target their exchange rates completely repudiates that approach.”
Canadian Finance Minister Jim Flaherty said talk alone of a currency war was “contributing to the uncertainty that is holding back stronger growth.”
The Japanese defense echoes that made by U.S central bankers against criticism from emerging-market officials such as Brazil’s Mantega for stimulus that has then undermined the dollar and lifted other currencies.

‘Negative Spillovers’

In a nod to such complaints, the G-20 members agreed to monitor and minimize any “negative spillovers” and said that monetary policy should always be aimed at domestic needs, according to a statement issued after the talks wrapped up on Feb. 16.
Developed nations should “pay attention to the effects their monetary policies have on external markets,” Chinese Vice Finance Minister Zhu Guangyao told the state-run Xinhua news service from Moscow.
Federal Reserve Chairman Ben S. Bernanke said Feb. 15 in Moscow that the U.S. has deployed “domestic policy tools to advance domestic objectives,” adding that bolstering the U.S. economy will support world growth.
Still, unlike their American counterparts, Japanese officials including Abe have commented publicly on their currency’s exchange rate, fanning speculation that they welcome its fall and that the yen’s weakness plays a part in their recovery strategy.

Appropriate Level

Japanese ruling-party lawmaker Kozo Yamamoto, who is close to Abe, in a Feb. 14 interview said that it would be “appropriate” for the yen to trade at about 95-100 to the dollar. Deputy Economy Minister Yasutoshi Nishimura said on Jan. 24 that it wouldn’t be a problem if the exchange rate reached 100.
U.S. Treasury Undersecretary Lael Brainard used a speech in Moscow to criticize “loose talk about currencies.”
“What’s best for the Japanese government is to stop making comments on the level of foreign exchange rates,” said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute in Tokyo. “Yen depreciation is an unavoidable side effect of easy monetary policy. It’s desirable to just leave the currency market alone.”
The G-20 also said that while the risks to the world economy have receded, growth remains too weak and unemployment is too high in many countries.

Global Outlook

Given the concern about the outlook for global growth, advanced nations accepted a U.S. proposal not to set new fiscal targets to replace those they agreed on in 2010 and which many of them are on course to miss. They promised instead to develop “credible medium-term fiscal strategies,” according to the statement.
The group also pledged to work together to curb multinational companies’ leeway to shift profits to low-tax countries, endorsing an initiative spearheaded by the U.K, France and Germany.
The G-20 meeting finished after a week of volatility in financial markets that started when the Group of Seven rich nations said on Feb. 12 that its members won’t use policies to “target exchange rates” and would focus on domestic needs. Confusion then broke out as G-7 officials bickered over whether their first joint comment on currencies since 2011 implied irritation with Japan.

Competitive Devaluation

The yen fell on Feb. 15 for the first time in four days as early drafts of the G-20 statement failed to echo the G-7’s vow. It was eventually added alongside a reiteration that countries will move “more rapidly” toward market-determined exchange rates and “refrain from competitive devaluation.”
Currency tensions may persist. Japan’s monetary push will probably force “many other central banks to remain or become even more expansionary in order to prevent excessive exchange rate appreciation,” Joachim Fels, chief economist at Morgan Stanley in London, said in an e-mail yesterday.
European Central Bank Vice President Vitor Constancio hinted there is a limit to patience with market moves.
Exchange rates moving in one direction for a long period “would of course raise questions and would then have to be discussed,” he said on Feb. 16.
To contact the reporters on this story: Simon Kennedy in Moscow; Toru Fujioka in Moscow at; Raymond Colitt in Moscow at
To contact the editor responsible for this story: Paul Panckhurst at