WASHINGTON – Finance leaders from the US, Japan and South Korea agreed to “consult closely” on foreign exchange markets in their first trilateral meeting on April 17, nodding to concern by Tokyo and Seoul over their currencies’ recent sharp declines.
The agreement in their first trilateral meeting came as receding expectations of a near-term US interest rate cut pushed the yen to 34-year lows, keeping markets on alert on the chance of yen-buying intervention by the Japanese authorities.
“We will continue to cooperate to promote sustainable economic growth and financial stability, as well as orderly and well-functioning financial markets,” according to a joint statement released after the trilateral meeting.
“We will also continue to consult closely on foreign exchange market developments in line with our existing G-20 (Group of 20) commitments, while acknowledging the serious concerns of Japan and the Republic of Korea about the recent sharp depreciation of the Japanese yen and the Korean won,” it said.
The US dollar slid to an intra-day low of 154.18 yen after the statement, before rebounding to 154.37 on April 17.
Washington’s acknowledgement over the currency concerns of Tokyo and Seoul may help underpin the yen and won by keeping traders on edge over the chance of intervention, analysts say.
Ms Helen Given, a currency trader at Monex USA in Washington, said the agreement would lay the groundwork for intervention by the Japanese authorities.
“While I don’t see a statement like this being enough to boost the yen and avoid an intervention, the language used there is pretty strong and I wouldn’t be surprised to see some concrete moves come out of Japan before the week is out,” she said.
Finance leaders of the G-20 major economies have a longstanding agreement that excessive exchange rate volatility and disorderly currency moves were undesirable.
Tokyo has argued that this G-20 agreement gave it freedom to intervene in the currency market to counter excessive yen moves.
But intervention could be costly, with no guarantee that it would reverse the current strong-dollar tide, which is driven by the big gap between US and near-zero Japanese interest rates.
In recent days, the dollar has approached the psychologically important 155 yen level, seen as the line in the sand that heightens the chance of intervention by Japan.
The trilateral gathering, attended by US Treasury Secretary Janet Yellen, Japanese Finance Minister Shunichi Suzuki and South Korean Finance Minister Choi Sang-mok, was held on the sidelines of the International Monetary Fund and G-20 finance leaders’ meetings this week in Washington.
In the joint statement, the finance leaders condemned North Korea’s exports of ballistic missiles to Russia, and Russia’s procurement of them.
The trilateral group affirmed its “commitment to utilise and coordinate our respective sanctions tools to impose costs on Russia for its war against Ukraine” and target North Korea’s weapons programme, the statement said.
The finance leaders also emphasised the importance of collaboration to “overcome supply chain vulnerabilities and the possible harm to our economies from non-market economic practices of other countries, including economic coercion and overcapacity in key sectors”, according to the statement.
REUTERS
