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G20 statement settles on generalities; approval to keep selling the Yen?

The G20 weekend meeting and its final statement settled again on generalities, with key passages posing little risk to neither discredit nor criticize ongoing Japanese polices, where no specific mention was noticed.

As Sean Callow, Westpac FX strategist, notes: "G20 statements always reflect the difficulty in reaching agreement among nations with often quite diverse policy approaches, settling on generalities with little risk of shaking up markets. Once again, for FX markets, the Moscow statement offered only a modest tweak compared to the Nov 2012 Mexico City statement"

Some key FX-related passages obtained from the statement can be found below:

- “We will not target our exchange rates for competitive purposes”.

- "We reaffirm our commitment to cooperate for achieving a lasting reduction in global imbalances..."

- "We reiterate our commitments to move more rapidly toward mores market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments..."

- "We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability.

- "We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open."

In brief, as Forexlive editor Eamonn Sheridan, notes: "If policy is aimed at achieving results in the domestic economy then its OK. Of course, it is difficult to gauge whether domestic policies are, or are not, aimed at weakening the currency."

Forex Flash: G20 repeats G7 line; USD/JPY still expected lower - Westpac

The G20 statement out of Moscow, as Westpac FX strategist Sean Callow, notes "offered only a modest tweak compared to the Nov 2012 Mexico City statement" he says, declaring that “we will not target our exchange rates for competitive purposes”. As Sean says, "this language was already agreed to by the G7 on 12 Feb, a formulation Japan was happy to sign and one which was calmly received by USD/JPY" the strategists adds. Westpac expects USD/JPY to lose its shine in the weeks ahead on BoJ disappointment, and expects "little danger for the pair in the weekend G20 statement..." The closer near term focus, in view of Sean, "could be on who is nominated as the new BoJ governor."
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Ahead of another day with US markets closed for holiday, USD/JPY is starting the week in Asia-Pacific to the upside, testing Friday's highs, last at 93.89, off recent fresh 4-day highs at 93.95, following G20 meetings in Moscow during the weekend. “It is as if the G7 is saying through the G20 that we have the right to weaker currencies because we have weaker economies so back off,” noted Gregory McKenna, CEO at GlobalFX and former Head of Currency Strategy at the NAB and Westpac.
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