INSTANT VIEW: G7 says brisk yen moves bad for markets, economy

SINGAPORE (Reuters) - The Group of Seven big industrialized economies said on Monday that a rapid rise of the yen against other currencies was bad for both markets and the economy and that it would watch developments and cooperate accordingly.

**********************************************************

COMMENTARY:

YOUSUKE HOSOKAWA, SENIOR TREASURY DEPARTMENT MANAGER, CHUO

MITSUI TRUST AND BANKING, TOKYO

"It clarifies that G7 members share the same understanding: They are concerned about the yen in the current forex market and are sending a message to the market.

"It has a political meaning. Because the statement referred the yen, it signals if there is any forex intervention, the target will be the yen. But whether there will actually be intervention by the Japanese government or coordinated intervention, it is still an open question. That is the reason the forex market has not shown much reaction."

KAZUYUKI KATO, FOREIGN EXCHANGE TRADER, MIZUHO TRUST & BANKING, TOKYO

"Given the panicky and irrational movements of the yen of late, the Japanese authorities may conduct intervention independently.

"Such action may be taken if the dollar falls below the 90 yen level. But given the fact that the dollar is rising against major currencies, except for the yen, Japan is not likely to be able to win support for coordinated action."

MINORU SHIOIRI, CHIEF MANAGER OF FOREX TRADING, MITSUBISHI UFJ SECURITIES, TOKYO

"Given the fact that countries such as South Korea and Australia are even trying to protect the value of their own currencies through dollar selling operations, it may be difficult for Japan to obtain consent on joint action from the international community.

"While Japan may launch intervention alone, it is not likely to have a lasting impact on the forex market."

RYOHEI MURAMATSU, MANAGER OF GROUP TREASURY ASIA, COMMERZBANK, TOKYO

"Launching intervention independently is like a drop in the bucket, and like fighting against the whole world. Intervening alone cannot possibly reverse the current trend of the yen.

"As the bubble is bursting everywhere from the housing market and the derivatives market to emerging markets, investors are becoming more risk-averse and pouring more money into buying the yen, which is considered to be the safest currency."

TAKAHIDE NAGASAKI, CHIEF FX STRATEGIST, DAIWA SECURITIES SMBC, TOKYO

"The issue is about the strong yen and not necessarily the weak dollar. They make it very specific that the currency in question is the yen, and hint that they are willing to back words with action if needed.

"The very rapid appreciation by the yen against the dollar last Friday likely was a reminder that market volatility needs to be dealt with. It now remains to be seen at which levels intervention will take place if needed, and also which country will shoulder much of the burden in an intervention."

MASAFUMI YAMAMOTO, HEAD OF FX STRATEGY JAPAN, ROYAL BANK OF SCOTLAND, TOKYO

"The Japanese government must have called for a joint G7 statement following Friday's sharp move in foreign exchange rates.

"If the dollar falls below 90 yen, financial authorities are likely to intervene in the forex market. A dollar drop below 90 yen could accelerate the yen's rise, having a bad impact on share prices."

RICHARD GRACE, SENIOR CURRENCY STRATEGIST AT COMMONWEALTH BANK

"An intervention (by the BOJ), or any coordinated move by global central banks would not be surprising. What we have got, in terms of the global credit crisis, it is harder and harder for anything to surprise us. The Aussie's fall to a record low against the yen was incredible.

"But an intervention will provide some stability to financial markets. Central banks believe that such rapid moves in markets are destabilizing. It will also help in providing liquidity as drying up of liquidity is leading to much bigger moves in currency markets."

KATSUHIKO KODAMA, SENIOR STRATEGIST, TOYO SECURITIES, TOKYO

"This is making the yen slightly weaker and stocks are responding positively to that. It's starting to become harder to sell, especially given all the big economic events coming up this week.

"For the immediate future, it looks as if we may have hit the bottom. But the real issue is currencies and whether the dollar can hold above 90 yen. We really don't know the future."

DWYFOR EVANS, CURRENCY STRATEGIST AT STATE STREET GLOBAL MARKETS IN HONG KONG:

"I don't know what this implies until we see more details. We had comment a couple of weeks ago that was sourced to the Japanese, but nothing happened.

"On the yen, it's understandable because the yen is reaching levels which we know are becoming more of a concern for Japanese corporates. There have been significant currency-related losses for Japanese manufacturers. It increases the possibility that we are going to see some sort of reaction."

TONY MORRISS, CURRENCY STRATEGIST AT ANZ

"These are very interesting comments and follow up from the RBA intervention we saw recently. The Bank of Japan is the next central bank that one would expect intervention from given the negative impact that a surging yen has on exporters and its stock markets.

"I am not surprised by these comments as there is a role for central banks to address volatility in currency markets. Currencies are on the agenda and perhaps after the meeting at Beijing (at the weekend) policymakers felt there was need for currencies to be addressed."

MARKET REACTION: The yen slipped slightly against the dollar and euro after Japan's finance minister said Group of Seven powers were set to issue a statement singling out the Japanese currency in warning against rapid moves.

BACKGROUND:

The yen climbed back near a 13-year peak against the dollar on Monday and an all-time high versus the Australian dollar as more investors dumped stocks and higher-yielding currencies on fears of a deep global recession.