* G7 official says statement intended to signal concern on
* Statement on currencies initially cools currency war talk
* G7 reaffirms commitment to market-determined exchange
* ECB Draghi says no such thing as a currency war
By Julie Haviv
NEW YORK, Feb 12 The yen leaped against the
dollar and euro on Tuesday, rebounding from recent multi-year
lows, after a Group of Seven countries official said a recent
statement on by the group was meant to express "concern about
excess moves" in Japan's currency.
The Group of Seven rich nations also meant its statement to
signal concern over statements from Tokyo about the levels of
the Japanese currency, a G7 official said.
The yen has been volatile depending on how markets have
interpreted the position of the G7 nations. The yen statement
from the G7 official countered the way markets had been
interpreting the position.
"The G7 statement was misinterpreted. The G7 statement
signaled concern about excess moves in the yen," the official
said on Tuesday. "The G7 is concerned about unilateral guidance
on the yen. Japan will be in the spotlight at the G20 in Moscow
The official was referring to a meeting of the Group of 20
finance ministers in Moscow this Friday and Saturday.
"It will need a senior named U.S. official referring to the
G7 statement on excessive volatility to give a clear signal that
G7 ex-Japan has run out of patience on yen weakness," said Alan
Ruskin, head of G10 FX strategy at Deutsche Bank in New York.
"We don't know who the official is who spoke about the G7
statement being misinterpreted, or how senior they are. Quite
frankly this is a mess, but it will only restrain yen selling
briefly, unless echoed by important named officials."
The G7 said it remained committed to market-determined
exchange rates and that fiscal and monetary policies must not be
directed at devaluing currencies.
The yen tumbled overnight, shortly after the G7 currency
statement, as markets initially thought Japan had received a
green light to continue efforts to reflate its economy. But the
market reversed course in North American trading hours, after
the comment from the official.
"The initial statement was interpreted as benign for the yen
and in this clarification they are very clearly singling out
Japan's policy," said Omer Esiner, chief market analyst at
Commonwealth Foreign Exchange in Washington.
"This sets us up for a very interesting G20 meeting later in
the week," he said. "But, the scope for a major shift in policy
as a result of statements is very limited, especially with the
U.S., U.K. and Japan actively participating in currency
The dollar last traded at 93.14 yen, down 1.2
percent on the day, according to Reuters data. The is below a
high of 94.42 yen on Monday, which was its strongest since May
The dollar has risen 7.4 percent against the yen so far this
"Statements and actions are two different things, so how
actionable these statements are is a question mark," Esiner
The euro last traded at 125.28 yen, down 0.9
percent on the day. On Feb. 6 it hit a near three-year high of
The common currency has risen about 9.5 percent against the
yen, leading to strong protests from some European leaders that
a strong euro would hurt a fragile economic recovery.
Strategists said the yen's weakness, driven by the new
Japanese government's demands for aggressive easing of monetary
policy to beat deflation, would persist and investors would buy
the dollar and the euro on dips, making any yen rebound
The euro last traded at $1.3448, up 0.3 percent on
the day. Gains accelerated after comments from European Central
Bank President Mario Draghi.
Draghi said there is no such thing as a currency war and
exchange rates are as important for growth as for price
stability. He also said Spain was on the right track towards
Concerns about a bailout for Cyprus, about a Spanish
political scandal and about Italy in the run-up to Feb. 24-25
elections are likely to check gains in the euro.
In European bond markets, Spain sold 5.6 billion euros of 6-
and 12-month debt, beating the top end of the target amount, but
paid a higher yield on the longer-term paper as a political
corruption scandal weighed on shaky confidence.
Italy's debt costs also rose as it sold 8.5 billion euros of
Financial markets showed a muted reaction to the news that
North Korea has conducted a nuclear test.
In the U.S., focus will be on the evening's State of the
Union address by President Barack Obama for any signs of a deal
to avert automatic spending cuts due to take effect on March 1.
On Wednesday, a primary focus will likely be on U.S. retail