My comment: Check the link below to the Bank of New York Mellon for key levels and technical analysis if interested. ------------------------------------------------------------------------------------------------ The G7 statement issued via the US Treasury makes it clear that the threat of multilateral intervention in the currency markets is a real one.
https://gm.bankofny.com/Research/MorningUpdate/Article.aspx?Type=0&ContentManagerID=7756 Headlines G7: The official FX statement notes that the group "reaffirms its shared interest in a strong and stable international financial system" but adds it "is concerned over the recent excessive volatility in the JPY and its possible adverse implications for economic and financial stability". Concluding, the group said, "We continue to monitor markets closely and co-operate as appropriate". UK: The BBC cites British Prime Minister Gordon Brown as saying that: “Now inflation is actually coming down over the next few months and that will mean that it gives scope to all the monetary authorities, including the Bank of England, round the world to make a decision about interest rates." The FT reports that UK chancellor Alastair Darling will use Wednesday’s Mais lecture formally to scrap the fiscal rules introduced by Mr Brown when Labour came to power in 1997 and give the green light to higher levels of borrowing. The paper notes that Mr Darling will argue that economic policy must be more flexible than before and allow much more borrowing than planned in the years ahead. Hometrack reports that UK house prices fell 7.3% y/y in October to take prices back to their lowest since March 2006. prices fell 6.2% in September. Australia: The RBA intervenes for a second time to buy the AUD. A spokesman said: “We did intervene for a while on Monday morning as the activity was similar to that on Friday”. South Korea: The Bank of Korea cuts interest rates by 75bp to 4.25% - its largest over rate cut, the second this month and the first ‘emergency’ move since shortly after September 11th 2001.BOK Governor Lee Seong-tae states that the bank is also considering its first ever purchase of commercial bank bonds to put cash into the financial system, noting: “We have not decided how much liquidity we would inject with bond purchases, but we are considering USD 3.5-7.0 Bn”. IMF/Ukraine: The IMF announces that it will offer to lend a larger- than-expected standby facility of USD 16.5 Bn to Ukraine (Iceland received USD 2.1 Bn) pending the passage of some financial overhaul legislation. IMF/Hungary: IMF Managing Director Dominique Strauss-Kahn said that the IMF was ready to approve a "substantial financing package" for Hungary after reaching broad agreement on a reform package that the country will implement as a condition for the emergency loans. Japan: Prime Minister Taro Aso states that the government would expand a scheme that gives banks access to public funds and also strengthen regulation on the short-selling of shares. Economy minister Kaoru Yosano reminds reporters that Mr Aso has advocated the use of a state body to buy shares from banks, for limits on bank recapitalisations to be raised and for the extension of tax relief on income from stocks and dividends. Mr Yosano noted that a newly announced bank bailout scheme should be increased several-fold to nearly USD 110 Bn. The BOJ’s corporate services price index rose 0.1% y/y in September down from 1.4% in September. The index fall 0.4% month-on-month – the second consecutive monthly decline. Euro-zone: Germany’s Ifo business climate index fell to 90.2 from 92.9 in September. The consensus forecast had expected a fall to 91.0. Comments We argued in this briefing on Friday that we would not be surprised to see “concerted action by the G7 finance ministries and central banks” in the currency markets or to “see a further round of international meetings this weekend.” In the event, we got the latter and had the unambiguous threat of the former. Although the round of meetings must have been by conference call rather than face-to-face, the net result was still a significant one. A statement released by the US Treasury (tellingly) on Sunday evening on behalf of the G7 finance ministers and central bank governors stated: “We reaffirm our shared interest in a strong and stable international financial system. We are concerned about the recent excessive volatility in the exchange rate of the JPY and its possible adverse implications for economic and financial stability. We continue to monitor markets closely, and cooperate as appropriate.” The message from the statement was subsequently rammed home by Japanese Finance Minister Shoichi Nakagawa who also noted in a press conference that he had been instructed by Prime Minister Taro Aso to take every possible step to stabilise markets and ensure smooth functioning of the financial system. Although he stated that no decision on specific action in the forex markets had been taken, the implications are unambiguous: the G7 nations stand ready to take multilateral action in the currency markets. The key word here, of course, is multilateral. Although it is entirely normal for G7 statements to be released via the US Treasury, it did seem to us that this time round it served to emphasise that any action taken would be by all the G7 nations and would include the US. This potential action therefore represents the first time since September 22nd 2000 that the US could be involved in such a move and only the second time since 1995 (they were also involved in bilateral intervention on June 17th 1998 with Japan’s MOF). It is also worth noting quite how extraordinary the timing of this statement actually was. Although there have been a number of communiqués issued by the G7 finance ministers and central bankers over the years outside the normal cycle of meetings, this the first time we can recall a “non-meeting” statement being issued specifically on the topic of currency market volatility (unless the Louvre and Plaza Accords of 1985 and 1987 respectively are considered to be included in this category). Once again, this only serves to highlight the importance of today’s warning both as a statement of immediate intent and as a broader indication of a longer term shift in thinking within G7. To us it seems one more piece of evidence that the pendulum is steadily swinging back towards a pre-1996 world where the G7 finance ministries and central banks took a more activist stance in the currency markets. Finally, it is worth briefly worth considering the timing of any intervention in both USD/JPY and in the JPY crosses. Although action could emerge at any time, it seems to us that it would achieve its maximum impact were it is seen to be led by the US Treasury. The NY morning today may therefore provide an ideal opportunity for them to make a clear statement of intent. ([EMAIL PROTECTED]) On Oct 28, 6:12 pm, "[EMAIL PROTECTED]" <[EMAIL PROTECTED]> wrote: > Several facts and opinions regarding the chaotic and politically > driven situation of all markets nowadays. > > Oct 27: RBA intervenes to support AUD/USD but isolated intervention is > deemed to fail, with the post-intervention AUD rally only temporary > > BBH: G7 statement implies that concerted intervention would most > likely be done through the yen route, with EUR/YEN in the limelight. > US dollar and yen rose by 6.7% and 12% respectively on a trade- > weighted basis in October and 3-month implied euro volatility is at > its highest level since the euro was introduced > > BNY: The safe haven status of the USD and JPY has caused both to > become overbought amidst record volatility and escalating crisis > conditions. European politicians have called for a "new Bretton Woods" > agreement, a return to a pre-1995 world where central banks took a > rather more activist stance in currency markets. The possibility of > multilateral intervention would achieve its maximum impact if it were > seen to be led by the US Treasury > > SG: The slide in USD/JPY below 100 could be merely a staging post > before a renewed JPY Endaka > > Danske: As the financial crisis draws to an end, some yen support will > wane. Looking at the sharp deterioration of the Japanese trade balance > that historically has moved closely with USD/JPY, very little downside > potential for the pair remains in the longer run - suggesting a USD/ > JPY move towards 130. Intervention more likely if USD/JPY breaks 95.90 > > BNP: G7 concern looks more to do with levels of exchange rates than > volatility. Triggers may be at 1.60 for EUR/USD and 100 for USD/JPY. > Sterilised intervention is largely ineffective unless it's backed up > with appropriate monetary policies > > Mizuho: With tax revenue down & exports the only growth engine in > Japan, intervention is just a matter of time --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "World-thread" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/world-thread?hl=en -~----------~----~----~----~------~----~------~--~---
