Yen Gains as G-7 Officials Offer Conflicting Views on Volatility

The yen gained versus the dollar and euro after unnamed Group of Seven officials gave conflicting signals over whether member nations are concerned that excess moves in the Asian currency will endanger trade relations.

Japan’s currency gained at least 0.3 percent against all of its 16 most-traded peers as an official in Washington, who requested not to be identified, said the nations are concerned about excessive moves in the yen and that Japan will be discussed at the Group of 20 meeting this weekend. It later pared some of the advance after a U.K. official who requested anonymity said the G-7 was not singling out an individual country or currency. The pound fell to a six-month low on bets the Bank of England will lower its growth forecast tomorrow.

“People understand that if anyone’s going to have their feet to the fire right now in terms of currency weakness, it’s going to be Japan,” Douglas Borthwick, a managing director and head of foreign exchange at Chapdelaine FX in New York, said in a telephone interview. “Officially, the most important countries are not singling out Japan. It seems that there are a couple that are, but not officially.”

The yen rose 0.9 percent to 93.47 per dollar at 5 p.m. in New York after appreciating as much as 1.5 percent. The Japanese currency strengthened 0.5 percent to 125.77 per euro. The 17-nation currency rose 0.4 percent to $1.3454.

Japan’s currency has tumbled 18 percent in the past three months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 4.9 percent, while the dollar declined 1.6 percent.

Pound, Loonie

Sterling dropped against most major peers as a slower growth forecast in the quarterly Inflation Report would underline the case for keeping interest rates at a record low. The U.K. currency was little changed at $1.5663 after declining to $1.5573, matching the low set on Aug. 8. It depreciated 0.3 percent to 85.89 pence per euro.

Canada’s dollar rose from the weakest this month versus its U.S. counterpart as the discount the nation’s crude oil trades at compared with the American benchmark was at the lowest level in three months. The so-called loonie appreciated 0.3 percent to C$1.0023 per U.S. dollar.

The Swiss franc was little changed against the euro even after the Swiss National Bank said it will keep applying its ceiling of 1.20 per euro and was ready to take additional measures. The franc traded at 1.2338 per euro after rising as much as 0.4 percent. The currency strengthened 0.4 percent to 91.70 centimes per dollar.

‘Currency Skirmish’

“The international countries are trying to put pressure on Japan, but it’s not clear they’re willing to go to the next step and take the next actions,” Nick Bennenbroek, head of currency strategy at Wells Fargo & Co, said on Bloomberg Television’s “Market Movers” with Tom Keene, Scarlet Fu and Sara Eisen. “It’s more of a currency skirmish than a currency war.”

The yen rose earlier against the euro after the G-7 released a statement that appeared to signal acceptance for a weaker Japanese currency, so long as Prime Minister Shinzo Abe’s government didn’t actively pursue devaluation.

G-7 finance ministers and central-bank governors said in the statement released in London, “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.”

Growth ‘Threat’

The first unnamed official then released a “clarification,” saying that the group’s member countries were targeting the yen’s recent volatility.

The clarification “showed officials were really concerned about the pace of yen weakness, which they seem to see as a potential threat to global growth.” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said by telephone from Washington, D.C. “It was a vague, bland statement at first.”

The G-7 officials will join finance ministers and central bankers from the G-20, which includes the G-7 and emerging markets such as Brazil, China and India, in Moscow on Feb. 15-16.

The euro has rallied 2 percent versus the dollar this year as banks have started paying back the European Central Bank’s emergency three-year loans early, shrinking its balance sheet just as the Federal Reserve and Bank of Japan expanded theirs. That’s prompted talk of a “currency war” between central banks trying to boost growth through lower exchange rates.

U.S. Treasury Undersecretary Lael Brainard told reporters in Washington yesterday that the U.S. supported Japan’s attempt to “reinvigorate growth,” while cautioning all countries against competitive devaluations.

“She endorsed Japan’s actions,” Adam Button, a currency analyst for in Montreal, said in a telephone interview. “And so long as Japan has the U.S. in its corner, it has nothing to worry about.”

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