As the name suggests, there are 20 countries in the G20 and this is where I think the 20 nations stand on currency policy.
No issues with weak yen
- U.S. -- Treasury supports Japan's policies
- Canada -- Said G7 statement is a consensus and not aimed at singling out Japan
- China -- Guilty of persistent currency manipulation, so no finger pointing
- Japan -- Definitely won't be criticizing itself
- Germany -- Wants to leave Japan alone
- U.K. -- Plans to ease consistent with their own devaluation of currencies
- India -- Wants a stronger currency to tame inflation
- South Africa -- Currency has been weak, won't have any major issues with Yen
- Turkey -- Recently cut interest rates, calls for intervention
- Argentina -- Guilty of recent currency intervention
- Indonesia -- Has been guilty of recently intervening to support local currency
Supports tougher currency language
- Russia -- Wants specific language against FX intervention
- South Korea -- Competes with Japan, has BIG problems with Yen weakness
- EU -- EU as a whole leans towards more specific language on FX
- France -- Has concerns about currencies
- Italy- Has concerns about currencies
- Mexico -- Has an "intervention free policy"
- Brazil -- Guilty of recent currency intervention, has strong currency
- Saudi Arabia -- Unknown
- Australia -- Plans to ease so probably won't join calls for tougher language on Japan
According to a draft of the G20 communique, the G20 may call for countries to "refrain from engaging in competitive devaluation," which would be tougher language on currencies but it is still not certain that these words will make it into the final statement because some of the heaviest hitters don't support major changes.
We do not anticipate substantial changes to the exchange rate language in the G20 statement. In fact it will probably read very much like the G7 statement on currencies that reaffirmed their prior stance and added a new line reaffirming that "fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates." If that is all the G20 says, USD/JPY could renew its rally but we will have to wait till Friday to know definitively.
The market will be comparing the final G20 communique to the latest G7 statement and the last G20 statement:
Latest G7 Statement on Currencies:
"We, the G7 Ministers and Governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets. We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates. We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability. We will continue to consult closely on exchange markets and cooperate as appropriate."
November 2012 G20 Communique on Currencies:
We reiterate our commitments to move more rapidly toward more market-determined exchange rate systems and exchange rate flexibility to reflect underlying fundamentals, avoid persistent exchange rate misalignments and refrain from competitive devaluation of currencies; to boost domestic sources of growth in surplus economies, and boost national savings in deficit economies. We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability. We commit to the implementation of ambitious structural reforms aimed at promoting output and employment. We have also made progress in strengthening our Accountability Assessment framework by agreeing on a set of measures to inform our analysis of our fiscal, monetary and exchange rate policies.