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Forex pairs in this Article » USD/JPY (Barcelona) - Derek Halpenny, European Head of Global Markets Research at the Bank of Tokyo Mitsubishi UFJ notes that the Yen has strengthened further during the Asian trading session ahead of the G-20 gathering today in Moscow.

He notes that Bloomberg has reported after obtaining a draft of the communiqué that there will be a pledge to "refrain from competitive devaluations" - nothing new and along the lines of the G7 statement earlier this week. He notes that the statement apparently also includes a pledge to monitor "possible monetary policy spill-over", which would be something new. Including this in the wider G-2O statement does make sense from the perspective of many member countries have for some time been highly critical of the fallout from QE from the Federal Reserve.

However, despite the spotlight on the statement today and the potential short term volatility, he asks, "Is it worth the paper its written on?" The Federal Reserve is planning a USD 1.0 trillion balance sheet expansion this year, the BOJ are of course expanding QE also, the BOE may well return to the policy of QE while the Brazilian authorities have been actively controlling its currency in order to maintain competitiveness.

Halpenny asks whether anything will change after the release of the today's statement? He writes, "Most likely not! If there is any change it won't be in policy or actions but possibly rhetoric. Japan is likely to be more cautious in commenting on the yen ahead of the announcement of who the LDP is planning for the three key posts at the BOJ."

He continues to add, "Your Party opposition to Kuroda and Muto means if the LDP wants either of those candidates or any other ex-MOF official the government must hope for DPJ divisions in the Upper House. Otherwise a different candidate - like Kazumasa Iwata - may be preferred."

However, he finishes by noting that the impact of the more aggressive Iwata may have been diluted somewhat by the G-7 statement which included a pledge only to use "domestic securities" to implement domestic policies. he writes, "Reuters has reported today that Muto is now the preferred candidate. Whatever the outcome, we suspect the yen could advance further, with USDJPY moving back below the 90.00 level."
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