Currencies volatile after mixed messages from G7
By Richard Hubbard
LONDON (Reuters) - The dollar and the euro rose against the yen on Wednesday in volatile trade after a G7 statement on exchange rates, designed to calm talk of a currency war instead triggered fresh concerns.
The G7 reaffirmed its commitment to market-determined exchange rates and said fiscal and monetary policies must not be directed at devaluing currencies - comments which at first were seen as supporting the recent weakness in the yen.
However, an official from the group, which links the United States, Japan, Germany, Britain, France, Italy and Canada, later said Tuesday's statement was meant to signal concern about the yen's excessive moves.
"The world's in turmoil with regard to currencies and it doesn't really take a lot, in terms of a bad word here or there, to spark volatility," Peter Dixon global financial economist at Commerzbank said.
Analysts were also concerned about an apparent lack of consensus at the G7 level in tackling the risks of competitive currency devaluations as countries try to spur growth through expansionary domestic monetary policies.
A concern illustrated when the Bank of England governor Mervyn King publicly criticized the anonymous G7 official.
"When I put my name to that (G7) statement yesterday, I didn't expect that other so-called officials will be out there giving unattributable briefings,...trying to claim that the statement said what it didn't say," King said.
The dollar and the euro both initially fell against a resurgent yen on Wednesday but then recovered with the greenback up 0.2 percent at 93.66 yen. The common currency recovered more strongly to be up 0.5 percent at 126.35 yen. Continued...