Is Summit G20 a chance to stop the yen?


Summit G20The second half of this week will be very important for the Japanese yen. Markets expect just two events of paramount importance that could potentially affect the dynamics of the Japanese currency.

On Wednesday and Thursday (13-14 February) a meeting of of the Bank of Japan’s monetary policy will take place. As the head of the Bank Governor Masaaki Shirakawa voluntarily reduce their term of office, having decided to leave the post in March, analysts are inclined to believe that the Board of Governors, this time choosing not to make important decisions, leaving the possibility that the new head of the Bank. However, some intrigue remains: is it possible, Shirakawa gives some comments as to what he would like to see the policy of the central bank after his resignation.

Now for the second event. February 15-16 in Moscow will host a financial summit Big Twenty, which will bring together finance ministers and central bankers of the world’s twenty largest economies. Experts believe that one of the main (if not the most important) topics of the meeting will be the topic of competitive devaluation of currencies. From Germany were repeatedly made attacks on Japan: say, by artificially weaken the national currency of the country is trying to create a competitive advantage for their exporters, which contradicts the joint commitment of the Group of Seven to adhere to the floating market rate. In response, the Japanese government not without reason, argued that only the currency returns to its pre-crisis levels, since before 2009 USDJPY pair rarely fell below 100 yen per dollar.

If you do not put a period, you should put the comma in this dispute of the two major export nations and G20 summit in Moscow. Before the summit, the Group of Seven countries issued a joint statement affirming its commitment to the principle of free exchange rates, without mentioning any specific country. And if last week there were fears that the discussions at the summit may hinder the development of a bull rally in the yen pairs, now the closer the event, the more the confidence of the market that these fears were groundless.

Сomments Monday, February 11 the U.S. Treasury Department regarding monetary policy in Japan. As the Deputy Minister L. Brainard, a U.S. financial institution supports the Government’s efforts to address. He  helped reduce anxiety and expressed in  Abe deflation and stimulate economic growth. While Brainard emphasized that the impact of the exchange rate by means of direct intervention is permissible only in the most extreme cases. In fact, the U.S. Treasury announced that it has no claims to reduce the yen as Japanese authorities have achieved this without the help of foreign exchange intervention.

Now the markets are waiting to hear about the same rhetoric and the final statement of the Moscow summit. If these expectations are met, before the yen will open new prospects for reducing, and many experts believe is an achievable rate of 100.00 for USDJPY. But, this trend can temporarily prevent typical for the second half of February repatriation flows that can cause short-term strengthening of the Japanese currency. I think it will be a great opportunity to open short positions in yen for those who have not yet take advantage of the currency decline.

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About Author

I have been friend with currency market since 2006. I hope that this friendship is not only useful to me, because over the years I have repeatedly provided analytical services to various companies and media outlets. I love fundamental analysis. Every day, I am convinced that the statistics is not boring numbers but fascinating reading, which, moreover, can predict the future. Technical analysis is also not neglected, especially as my hobby - finding effective algorithms for automated trading systems.