* Concerns grow over currency policies ahead of G20
* S&P; 500 hits highest level since Nov 2007 before backing
off
* G20 meeting in focus after G7 statement confusion
By Leah Schnurr
NEW YORK, Feb 13 (Reuters) – Currency trading was volatile
on Wednesday as concerns about currency wars and the fallout
from mixed messages from the G7 put added focus on a meeting of
world leaders in Moscow later in the week.
The yen was flat to little changed, giving up some of its
sharp gains from the previous session. Comments from Russian
Deputy Finance Minister Sergei Storchak weighed on the yen after
he said the currency had definitely been over-valued and that
“there are no signs” Japan’s monetary authorities were
intervening.
Currencies have been volatile after a G7 statement earlier
this week on exchange rates, designed to calm talk of a currency
war, instead triggered fresh concerns.
The G7 on Tuesday 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 the statement was meant to signal concern about the yen’s
excessive moves.
Analysts were 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
expansionist domestic monetary policies.
The Bank of England’s chief said on Wednesday the statement
should be taken at face value and anonymous officials should not
try to reinterpret it.
“Investors overall are wary to push the yen much lower ahead
of the G20 meeting and there is a bias for some give-back after
the massive decline of the yen over the past few months,” said
Omer Esiner, chief market analyst at Commonwealth Foreign
Exchange in Washington, D.C.
The euro last traded at $1.3447, down 0.04 percent on
the day, and was at 125.69 yen, down 0.04 percent.
JAPAN CENTER STAGE
The confusion sown by the G7 statement has heightened the
possibility that policymakers will use a G20 meeting in Moscow
on Friday and Saturday to make further comments, either about
the yen or the risk of wider currency devaluations.
“Presumably on the weekend there will be something that
talks about the pace of moves in the yen. That’s what the market
is expecting now,” said Geoff Kendrick, FX strategist at Nomura.
The focus of the current concerns in the currency markets is
Japan, where Prime Minister Shinzo Abe’s government is pushing
for aggressive policies by the Bank of Japan to beat deflation
through monetary expansion.
Anticipation of the bolder measures has sent the yen down
nearly 20 percent against the dollar since November, sparking
comments from policymakers in the euro area about the impact on
the common currency as the region struggles with a recession.
“To me the statement says as long as price action is smooth,
(G7 officials) are not going to do anything. So I stand by my
point that we are going to have more yen weakness in the
medium-term,” said Vasileios Gkionakis, head of global FX
strategy at UniCredit in London.
STOCKS TREAD WATER
World stock markets struggled to gain further traction
after the S&P; 500 hit its highest level since November 2007.
European shares were higher, but a measure of world markets
was little changed and the Dow Jones industrial average fell
back from the 14,000 level. After hitting a more-than-five-year
high, the S&P; 500 also waned as it encountered resistance.
“We will hit resistance, but the fundamentals and
(microeconomic) picture are looking good, so if there is a
correction, it’s going to be a brief one,” said Jack De Gan,
principal at Harbor Advisory in Portsmouth, New Hampshire.
U.S. equities have started the year on a strong note, helped
by growth in corporate earnings and an early January rally after
the full brunt of the so-called “fiscal cliff” of automatic tax
hikes and spending cuts was averted. A lack of recent catalysts
has kept gains more limited and the market has slowly ground
higher on low volume.
The Dow Jones industrial average was down 53.23
points, or 0.38 percent, at 13,965.47. The Standard & Poor’s 500
Index was down 1.07 points, or 0.07 percent, at 1,518.36.
The Nasdaq Composite Index was up 4.99 points, or 0.16
percent, at 3,191.49.
MSCI’s world equity index edged down 0.02
percent, while the FTSE Eurofirst 300 index of top
European companies ended up 0.4 percent.
The benchmark 10-year U.S. Treasury note was
down 13/32 in price to yield 2.0241 percent.
