G-7 Statements on Forex: Evolution of Currency Policy Since 9/11/01

October 27, 2008

10/27/08 Conference Call “We reaffirm our shared interest in a strong and stable international financial system. We are concerned about the recent excessive volatility in the exchange rate of the yen and its possible adverse implications for economic and financial stability. We continue to monitor markets closely, and cooperate as appropriate.” Afterward, the French Finance Minister reportedly downplayed the likelihood of coordinated intervention. Japan has almost $1 trillion of reserves, however. OIL $64.15 EUR 1.262 YEN 91.0
10/10/08 Washington G-7 agrees on need for “urgent and exceptional action but lacks detail other than listing five principles to guide bank recapitalisation, depositor protection and the reliquification of financial markets. The statement promises to protect taxpayers and asks that governments “avoid potentially damaging effects on other countries. The statement was unusually short and did not included a broad depiction of economic conditions or a paragraph about currency market policy. OIL $77.70 EUR 1.341 YEN 100.3
04//11/08 Washington Replaced two sentences of FX section stating a desire for parities to reflect fundamentals and not show excessive volatility with the following more sharply worded protest:  “We reaffirm our shared interest in a strong and stable international financial system.  Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability.”  Wording on the yuan was same as in February.  No explicit mention of the euro, dollar, or yen.   OIL $110.14 EUR 1.583 YEN  100.8
02/09/08 Tokyo Meeting focused upon global slowdown, not forex issues, and policy responses to such.  Effort made to present solidarity but did not unveil immediate actions. Comment on yuan softened by substituting word “encourage” for phrase “stress its need to allow.”  No other changes made to forex policy paragraph.  ECB’s Trichet quelled talk of an ECB near-term rate cut.  Bank of Canada Governor Carney: more easing is likely. OIL $91.77 EUR 1.451 YEN 107.3
10/19/07 Washington No mention of dollar, yen, or euro.  Same first 3 sentences in forex policy paragraph but modified language on yuan to read “We welcome China’s decision to increase the flexibility of its currency, but in view of its rising current account surplus and domestic inflation, we stress its need to allow an accelerated appreciation of its effective exchange rate.” OIL $88.60 EUR 1.430 YEN 114.5
04/13/07 Washington Identical exchange rate paragraph used as in the Essen statement, with no explicit mention of yen, yuan, dollar, or euro. Expressed a little more optimism about G7 growth, but country-specific comments were similar to the February communique. Deleted praise for Chinese reforms. OIL $63.63  EUR 1.353  YEN 119.1
02/10/07 Essen “We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur.” No explicit reference to the yen. Upbeat comments about growth outlook. OIL $59.89 EUR 1.300 YEN 121.8
09/16/06 Singapore Same currency market policy paragraph as used in April 2006. Chinese officials offered no more specific promises on yuan flexibility timetable. In later remarks, European officials said the yen should appreciate. More moderate U.S. growth was predicted, but the global outlook was called positive. OIL $63.40 EUR 1.265 YEN 117.5
04/21/06 Washington Same first 3 sentences in paragraph dealing with FX. Then, “Greater exchange rate flexibility is desirable in emerging economies with large current account surpluses, especially China, for necessary adjustments to occur.”  Made recommendations for a shared attack on global imbalances.  Called expansion outlook favorable and inflation contained. OIL $75.17 EUR 1.234 YEN 116.6
12/03/05 London Kept standard 3-sentence expression of FX policy. Changed yuan comment to “we expect that further flexible implementation of China’s currency system would improve the functioning and stability of the global economy and the international monetary system.” Upgraded growth outlook to “solid” but broadened risk from oil to “possibility of increasing inflationary pressures.” OIL $59.32 EUR 1.172 YEN 120.5
09/23/05 Washington First 3 sentences of FX paragraph are the same.  Welcomed Beijing decision to pursue greater flexibility in FX regime and “expects the development of this more market-oriented system…” Global economy continues to expand, but future risks have increased and become more numerous. Such include higher energy prices, growing global imbalances, and protectionism. OIL $64.19 EUR 1.292 YEN 107.8
04/16/05 Washington Fifth consecutive G7 statement to invoke same 4-sentence FX paragraph adopted initially in February 2004. Trichet said the call for FX flexibility meant for all “emerging Asian nations with restrictive FX policies,” not just China. The Chinese did not attend. OIL $50.49 EURO 1.292 YEN 107.8
02/05/05 London No change in FX paragraph. The head of the People’s Bank of China denied any timetable for a yuan revaluation. G7 claimed global growth is more moderate than in prior October but is “expected to remain robust for 2005. “Inflation “remains subdued.” U.S. committed to fiscal consolidation, Europe and Japan to further structural reform. OIL $46.48 EUR 1.287 YEN 104.1
10/01/04 Washington Same FX paragraph for a third straight time.  “Oil prices remain high and are a risk. So first we call on oil producers to provide adequate supplies to ensure that prices moderate. Second, it is important for consumers and producers that oil markets function efficiently, and we encourage the IEA to enhance its work on oil data transparency.” OIL $50.12 EUR 1.240 YEN 110.5
04/24/04 Washington Identical 4-sentence paragraph on FX policy to that in the Boca Raton G7 statement. FX should reflect fundamentals. Excessive FX volatility and disorder are undesirable. G7 to cooperate on FX. Urged flexible FX regimes where lacking. OIL $36.46 EUR 1.830 YEN 109.1
02/07/04  Boca Raton No deletions but two inserts made to clarify what some felt was a market “misinterpreta-tion” of Dubai’s message on FX policy. Added the following after Dubai’s first sentence: “excess volatility and disorderly movements in exchange rates are undesirable for economic growth.” Final sentence now reads “…areas that lack such flexibility in FX rates to promote…” OIL $32.48 EUR 1.270 YEN 105.5
09/20/03 Dubai “Exchange rates should reflect fundamentals. We continue to monitor exchange rates closely and cooperate as appropriate in this context. We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanisms.” OIL $27.03 EUR 1.137 YEN 114.0
04/12/03 Washington “Growth in most of our economies has been subdued, though uncertainties have diminished…We will respond as needed to developments in the economic environment. We will continue to monitor exchange markets closely and cooperate as appropriate.” No specific currency misalignments or policies were mentioned. OIL $28.00 EUR 1.075 YEN 120.5
02/22/03  Paris While affirming confidence in the underlying strength of their economies, officials, “recognize the imperative for higher growth rates and resolve to take steps to achieve this result.” ECB president Duisenberg hinted a near-term rate cut may be in the works, but the statement’s policy commitments were broad and unlikely to impress traders. Language used on Forex was standard stuff. OIL $35.58 EUR 1.077 YEN 118.7
09/27/02 Washington Aside from a pledge “to monitor exchange markets closely and cooperate as appropriate,” statement did not comment on recent countries. “Economic growth is continuing, though at a more moderate pace than earlier this year. Risks remain.” OIL $30.45 EUR 0.981 YEN 122.6
04/20/02 Washington Fifth straight statement to avoid discussion of specific currencies and to merely include standard language about monitoring markets and cooperating as appropreate… “Each of us has an aongoing responsibility to implement sound macroeconomic policies and structural reforms to sustain recovery.” OIL $26.40 EUR 0.892 YEN 130.3
02/09/02  Ottawa Standard clause about monitoring forex and cooperating as appropriate but no further remarks about any particular currency. “Prospects have generally strengthened for resumed expansion… We remain vigilant and will each continue to take appropriate steps to promote a sustained recovery.” Discussed Argentinal and Enron. U.S. Treasury Secretary O’neill said the G7 was satisfied with Japan’s progress. OIL $35.58 EUR 0.872 YEN 134.7
10/06/01 Washington Meeting less than one month after the 9/11 attacks, no currencies were cited. “We will continue to monitor exchange markets closely and cooperate as appropriate.” O’neill “understands” why BOJ intervened heavily in September. G7 determined to “bring forward measures to increase economic growth and preserve the health of our financial markets.” OIL $ 29.60 EUR 0.918 YEN 120.5

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