Economy

G-7 Reaffirms Commitment Not to Target Currencies as Yen Slides

http://www.bloomberg.com/news/2013-05-11/g-7-reaffirms-commitment-not-to-target-currencies-as-yen-slides.html

Global finance chiefs reaffirmed their three-month old commitment not to manipulate currencies, signaling acceptance of the weakest yen in four years. Finance ministers and central bankers from the Group of Seven today agreed “not to target exchange rates,” U.K. Chancellor of the Exchequer George Osborne said after chairing a meeting in Aylesbury near London. He said members have “held to” their February pledge to avoid doing so. Finance ministers and central bankers from the Group of Seven today agreed “not to target exchange rates,” U.K. Chancellor of the Exchequer George Osborne said.

The yen this PAST week fell beyond 100 per dollar for the first time since 2009, extending a decline fueled by more aggressive monetary policy from the Bank of Japan. While the slide may hurt trade rivals, the G-7 officials are signaling acceptance of Governor Haruhiko Kuroda’s argument that Japan’s bond buying is aimed at bolstering growth and not at manipulating the currency. “The Bank of Japan isn’t targeting the exchange rate,” Kuroda told reporters yesterday. Finance Minister Taro Aso said there had been no criticism of Japan’s policies at the G-7 and he had no opinion on his currency’s value. The BOJ last month announced it would double its monthly bond purchases in an attempt to deliver 2 percent inflation within two years and end two decades riddled with recession and deflation.

“The world community has made clear that domestic tools that are designed to deal with domestic growth are within the bounds of what the international community thinks is appropriate,” U.S. Treasury Secretary Jacob J. Lew said yesterday. “We’ve made it clear that we’ll keep an eye on that.”

With the yen falling, nations including Australia, New Zealand and Switzerland are also moving to counter climbing currencies before they hurt their exporters. The risk is such efforts provoke retaliation from trade partners...

THE GLOBAL GAME OF "CHICKEN" RESUMES...


Asia-Pacific Nations Push to Rein In Rising Currencies

http://www.nytimes.com/2013/05/09/business/global/09iht-asiaecon09.html

For many countries, inflows of cash would be a blessing. But incoming money has proved to be too much of a good thing in parts of the Asia-Pacific region, pushing currencies to uncomfortably high levels just as economic growth is tapering off. For many months, policy makers across the region have deployed a range of tools to try to dampen the adverse effects that can come when too much money flows into an economy. The latest example came Wednesday, MAY 8, when the central bank in New Zealand confirmed it had been selling New Zealand dollars on the currency markets in recent weeks to try to stem the sharp rise the kiwi has staged over the past two years.

The central bank governor, Graeme Wheeler, speaking in regular twice-yearly testimony to Parliament, did not say how much money had been deployed. Still, the acknowledgement spotlighted the discomfort that is being felt in the many parts of the region that have seen their currencies soar over the past few years. On Tuesday, the central bank in Australia hinted at its unease with the Australian currency’s strength — the Australian dollar is hovering near multiyear highs — which it cited as an important reason for an interest rate cut that took borrowing costs in the country to a record low.

The Thai finance minister also recently voiced his concern that the Thai baht was too strong. In the Philippines, the central bank cut a key interest rate in late April in a move that analysts said was aimed in part at reversing some of the gains the peso had made in recent years. For export-dependent countries, in particular, strong currencies can be a significant burden, because they make locally made goods and services more expensive for overseas customers. “The strength of the Australian dollar has been a real pain for the country’s manufacturing and tourism sectors,” said Klaus Baader, a regional economist at Société Générale in Hong Kong.

A string of rate cuts by the Australian central bank over the past 18 months has failed to weaken the currency, he added, because Australia’s robust economic fundamentals, low public-sector debt and strong investment returns, relative to those in other developed economies, continue to make it an attractive destination for overseas cash. The same applies to many parts of emerging Asia, whose growth rates and interest rates easily top those in the West. Years of aggressive monetary easing in the United States, meanwhile, mean that there is more cash looking for yields — some of which has flowed into promising markets in Asia and elsewhere...



SONDHEIM ALREADY SET IT TO MUSIC! I THINK I HAVE NEXT WEEKEND THEME!



G-7 Focus on Bank-Rule Overhaul to Reduce Stability Risks

http://www.bloomberg.com/news/2013-05-11/g-7-focus-on-bank-rule-overhaul-to-reduce-stability-risks.html

Group of Seven finance ministers and central bankers said MAY 11 they are moving toward revamping banking rules and ensuring that any lender on the brink of failure can be shut down without threatening financial stability. An “extensive discussion on banking regulation” included talks about how to close banks, European Central Bank President Mario Draghi told reporters yesterday after a G-7 meeting in Aylesbury, near London. The officials had a “clear sense that the different legislations should converge as much as we can on this point,” he said.

European Union leaders began work on a banking union last year to break the cycle of contagion between nations and their lenders that has plagued the euro area in the past three years. A European bank resolution plan is due to be proposed in June. “It is important to complete swiftly our work to ensure that no banks are too big to fail,” U.K. Chancellor of the Exchequer George Osborne said after leading the meeting. “We must put regimes in place in each of our jurisdictions to deal with failing banks and to protect taxpayers, and to do so in a globally consistent manner.” The finance chiefs said they also discussed the importance of developing the EU’s banking union and cleaning up lenders’ balance sheets. A U.S. Treasury official, speaking to reporters on condition of not being identified, said participants talked about how to move quickly toward a banking union. Treasury officials, led by Secretary Jacob J. Lew, have emphasized in recent weeks that the crisis in Cyprus demonstrated the importance of a full euro-area banking union with a single supervisory mechanism and authority to shut down banks.

The U.S. also has pressed Europe to find ways to unclog bank credit lines to small and medium-sized companies, and that topic was discussed by the ministers, the U.S. official said. Draghi said the U.S. gave a presentation on how the Federal Deposit Insurance Corp. works when closing banks, “and this is certainly going to be taken into account by our commission.”

THIS IS CAUSE TO WORRY ABOUT THE FDIC...IT MAY BE OUR LAST FUNCTIONAL COG IN THE FINANCIAL MACHINE...