Japan's Yen pushed down by G7 intervention

Published on in Currency Exchange News by

It was volatile day in the currency markets on Friday after the G7 (group of 7 industrialised countries) announced that it would act together to try and reverse the Japanese Yen’s recent surge.  The last time this happened was in 1999 after the Euro slumped in 1999.

 The Yen has surged recently as the people of Japan have been selling off overseas assets in a bid to try and fund their disaster stricken country following the recent Earthquake and Tsunami.  Assets based overseas have fuelled a large sell in various currencies back into JPY.

 Sterling started the day on the back foot after dovish comments by BoE deputy governor Charles Bean, who was quoted saying ‘Britain has entered a hazardous period and inflation could be above target next year’.  This put doubt in investor’s minds about when the BOE may hike rates.

 Rate hikes were predicted to be as early as June / July, however expectation has now been pushed out to September by some short-term interest rate analysts.

 “The ECB is unanimous in their decision, but there is still uncertainty in the BOE. This cornerstone figure of the BOE has now dramatically changed circumstances,” said Geoffrey Yu, FX Strategist at UBS.

 Sterling’s negative start was prompted by Natiowide Consumer Confidence for February coming in at 38, well below the consensus figure 48, and below the 47 figure from the previous month.  Mortgage approvals also showed a decline from 47k the previous month to 43k.

 The pound initially fell to €1.1413, it’s lowest since 5th November 2010.  Against the dollar the pound finished up the day at $1.6180 after briefly dropping to $1.6059 early on.

 Investors predict that the pound will continue to be under pressure against the majors until analysts re-assess the chance of a rate hike in the coming months, as they think that the economy does not look robust enough to start a tightening campaign.

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