The yen surged versus the dollar and euro after a Group of Seven official said a statement on exchange rates was misinterpreted and should be viewed as a sign of concern about excess moves in the Asian currency.
The Japanese currency gained against all of its 16 most- traded peers as the official, who requested not to be further identified, said the G-7 is concerned about unilateral guidance on the yen and Japan will be discussed at the Group of 20 meeting in Moscow this weekend. The G-7 statement pledged to avoid devaluing exchange rates in the pursuit of economic growth. The South African rand fell after North Korea tested a nuclear weapon in defiance of the United Nations, prompting investors to shun riskier assets.
The clarification “showed officials were really concerned about the pace of yen weakness, which they seem to see as a potential threat to global growth.” Joe Manimbo, a market analyst at Western Union Business Solutions, a unit of Western Union Co., said by telephone from Washington, D.C. “It was a vague, bland statement at first.”
The yen rose 1.2% to 93.26 per dollar at 10:17 a.m. in New York. The Japanese currency strengthened 0.9% to 125.29 per euro. The 17-nation currency climbed 0.2% to $1.3438.
Japan’s currency has tumbled 17% in the past three months, the worst performer of 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro rose 5%, while the dollar declined 1.3%.
The rand also fell versus all of its most-traded counterparts before the release of data tomorrow that may show retail sales growth in South Africa slowed, adding to evidence Africa’s biggest economy is stalling. The currency depreciated 0.5% to 8.9584 per dollar after earlier falling to 8.9908, its weakest level since Feb. 1.
Britain’s pound dropped to a six-month low versus the dollar amid bets the Bank of England will lower its growth forecasts in its quarterly Inflation Report tomorrow, underlining the case for keeping interest rates at a record low. The U.K. currency fell 0.3% to $1.5612 after declining to $1.5573, matching the low set on Aug. 8.
The Swiss franc gained against the euro even after the Swiss National Bank said it will keep applying its ceiling of 1.20 per euro and was ready to take additional measures. The franc rose 0.1% to 1.2318 per euro after increasing as much as 0.4%. The currency strengthened 0.4% to 91.66 centimes per dollar.
“You could argue the clear foreign-exchange manipulators out there are the Swiss,” Trevor Greetham, director of asset allocation in London at Fidelity Worldwide Investment, which manages $240 billion, wrote in an e-mailed note today. “We are short both the yen and the Swiss, two currencies that pay the lowest interest rates in the world and both with central banks aiming explicitly or implicitly to devalue.”
The G-7 clarification spurred gains in the yen and came just hours after the world’s major industrial economies appeared to signal acceptance for a weaker Japanese currency so long as Prime Minister Shinzo Abe’s government didn’t actively pursue devaluation.
G-7 finance ministers and central bank governors said in the earlier statement released in London, “we reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates.”
Finance ministers and central bankers from the G-20, which includes the G-7 and emerging markets such as Brazil, China and India, are set to meet in Moscow on Feb. 15-16.
“It is hard to see how the market can be accused of mis-interpreting a communique, which was essentially a re-run of one delivered in 2011,” said Daragh Maher, a currency strategist at HSBC Holdings Plc in London. “The problem for the foreign- exchange market is that we now trading rhetoric rather than data, which means we are at the behest of whichever comment is the latest to hit the screens.”