How G-20 Meeting May Influence Japanese Yen?
The Japanese yen demonstrated yesterday the same pattern as other currencies as it was highly volatile, yet closed near its opening level. Unlike some other currencies it managed to close above the opening level against most currencies.
The explanation for such behavior is simple: the traders were agitated, anticipating the G-20 meeting, yet was unwilling to risk as the outcome of the meeting is far from clear. It was obvious for most traders that Japan wouldn’t perform another intervention before the meeting, but what it’ll do after?
The Japanese policy showed that they are ready to stem the currency’s appreciation to protect the economy. Yet the widespread depreciation of the currencies across the world causes concerns for the global economy and will likely be discussed on the meeting. Some analysts said that the increase of the interest rates was clever political move by China so it now can avoid blames for devaluation of its currency and to be able to blame others. Now China can say “hey, I demonstrated willingness to allow my currency to appreciate and what are you doing? Weakening your currencies?” Will Japan dare to weaken its currency in case China would take such stance?
Some economists say that, in fact, the G-20 meeting isn’t important at all. The countries are divided and it isn’t likely that they’ll make any major decision. So traders should trade on fundamentals, “forgetting” to some degree about this meeting, and wait for any major reports, notably the US third quarter GDP. Anyway, as it was shown by the previous Japan’s intervention, market sentiment may outweigh the government’s efforts to control the currency. For now, there is no reason for the yen to stop its rally.
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Earlier News About the Japanese Yen:
- Yen Rises vs. Dollar Ahead of G-20 Meeting (2010-10-18)
- Yen Weakens as Stocks Gain, Talks About Intervention Intensify (2010-10-13)
- Yen Strengthens, Causes Speculation About Another Intervention (2010-10-06)
- Bank of Japan Cuts Interest Rates, Yen Weakens (2010-10-06)
- Poor US Macroeconomic Reports Increase Appeal of Yen (2010-09-28)