February 12 Tuesday
After three days of consolidation between 1.3430 and 1.3360, the euro broke out of its range and rallied to 1.3460 from 1.3400 following the G-7 statement this morning in London where they said that the exchange rates will not be targeted. This alleviated market concerns of a currency war as the members pledged to avoid artificial devaluation of their FX rates in pursuit of a stronger economic growth.
“We, the G-7 ministers and governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regards to actions in foreign exchange markets.”
“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments and that we will not target exchange rates.”
“We have agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.”
The Japanese yen fell against its major counterparties and pared its recent gains after the G-7 statement which was viewed by many market participants as further weakening the yen as the new Japanese government will press for aggressive easing of monetary policy.
Japan’s Finance minister Taro Aso said the G-7 acknowledged Japan is not chasing a weaker yen and that its monetary policy is aimed at reversing deflation.
Euro-yen rose 136 points to 126.93 from 125.57 while Dollar-yen made small gains to 94.40 from 94.16 (+24 pips).
Euro Swiss rallied by 62 points to 0.9212 from 0.9150 in Europe following the comments from the Swiss National Bank chairman Thomas Jordan who said that the SNB could use additional measures to manage monetary policy alongside the cap on the value of the Swiss Franc.