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Yen climbs despite G-7 warning

Yen climbs despite G-7 warning

A warning by top industrialized nations about the recently surging yen fell flat Monday, unable to overcome the deluge of investors buying back the Japanese currency by reversing so-called carry trades that has sent the yen to a 13-year high.
"We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability," finance ministers and central bank heads from the Group of Seven countries said in a statement.
The group reaffirmed its shared interest in a "strong and stable financial system" and pledged to continue to monitor markets and "cooperate as appropriate."
But they stopped short of announcing an intervention to sell the yen, disappointing some market players who had been hoping for authorities to act.
"Investors globally are being assailed now, and they have been buying back the yen," said Masafumi Yamamoto, head of foreign exchange strategy at Royal Bank of Scotland in Tokyo. The statement had little if any impact, he said.
The yen jumped Friday as investors rushed to unwind speculative yen carry trades, which involve buying yen to invest in currencies with higher-yielding bonds and other assets. The global financial crisis has scared them into pulling money out of those investments, forcing them to buy back the yen and lifting its value.
The dollar climbed to 92.40 yen Monday afternoon in Tokyo from 94.24 late Friday in New York. It also gained against the euro, which bought 114.44 yen.
On Friday, the dollar fell as low as 90.89 yen, the lowest since August 1995. A week earlier, the dollar was above 100 yen.
The rise of the yen has alarmed Japan, where export-oriented businesses are already hurting because of the global financial crisis. A rising yen makes Japanese products more expensive abroad and reduces the value of overseas profits when repatriated.
Japanese stock prices have tumbled in response, with the key stock index plunging more than 6 percent Monday to its lowest close in more than a quarter century. It has lost more than 20 percent since last week and 40 percent in the last month.
Investors unloaded shares of major exporters, sending automakers Toyota Motor Corp. and Nissan Motor Co. more than 8 percent lower.
A move earlier Monday by Japanese Prime Minister Taro Aso to introduce measures to calm volatile stock markets failed to revive flagging sentiment.
Calling an emergency meeting of the Cabinet and ruling party officials, Aso urged steps including tighter controls on short-selling and expanding a government fund to recapitalize banks to as much as 10 trillion yen ($106.1 billion) from 2 trillion yen, according to Kyodo news agency.
Aso did not suggest intervening in foreign exchange markets, but Japanese Finance Minister Shoichi Nakagawa used his strongest language yet to describe the yen's appreciation. He called the recent swings "excessive" and said he is extremely worried about the impact on Japan's economy.
He told reporters that the G-7 issued its statement at Tokyo's request. The G-7 includes Japan, the United States, Britain, France, Germany, Canada and Italy.


Updated : 2020-11-30 13:06 GMT+08:00