The dollar dropped initially against the yen and the euro after the G7 statement released late last Friday. The dollar tumbled to a fresh low at 1.4348 against the euro.
There was no change in the language regarding the currencies. The G7 just repeated that excess volatility in foreign exchange is undesirable. Apart from urging China to allow its currency appreciate more rapidly, G7 finance ministers and central bankers did not mention any other currencies including the weak yen and dollar and the strong euro.
Besides, the G7 indicated that record oil prices and US housing and credit sector slump will impede economic growth. This prompted investors to cut back risk appetite and reduce carry trades. The yen rallied sharply against high yielding currencies. The yen rallied to session low at 113.26 against the dollar, and strengthened to 230.35 versus the sterling and 160.48 versus the euro.
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