Sunday, September 18, 2011

G7 meeting did not introduce substantial measures to smell smoke and then the global currency war

After consultations last weekend, G7 issued after the meeting, a brief communique stressed the need to maintain financial stability, boosting market economy and the strengthening of international coordination. However, G7 finance ministers and central bank governors did not present a detailed economic stimulus measures, or short-term rescue measures, it is still difficult to eliminate market concerns.

Same time, for last week’s strong intervention in currency markets with Switzerland after the turmoil caused by foreign exchange, the communique merely expressed support for market-determined exchange rate, the market is extremely concerned about the joint intervention, G7 meeting has not, as market expectations, as announced measures.

“In these circumstances, the so-called” currency war “is inevitable, and developed competitive devaluation has actually been there.” Bank of Communications Schroder Fund senior policy analyst Shen Nan told ” Daily Economic News “reporter, said. Market is expected, although the G7 is not published on interventions in the foreign exchange, so can not help in the new round of global recession expected of them, to start another “currency war.”

G7 meeting Nan Xiao market worries

Reoccurrence of the uncertain U.S. economic recovery, the escalating debt crisis of the European context, the global economy into recession is expected to become more intense. At this time, the market to focus on the G7 meeting, I hope these seven developed economies to stimulate global economic growth negotiate a substantive measures. However, the Group of Seven has always been difficult to reach, could not come up with effective, unified rescue plan.

“G7 meeting failed to reach a uniform substantive measures to stimulate economic growth, an effective solution to current problems in the global economy, there are two main aspects to consider, first, the recession has not quite that serious, Governments may believe that a recession is expected, but no real economic data into a recession. “Shen Nan analysis.

Secondly, it is the G7 countries will have its own political problems, the policy was not much room to play. Including within the euro area, core and edge of the country against country, while the new leader of the Japanese government took office, and other problems, may attend more. Therefore, the meeting did not see the G7 concerted content.

But in the communique issued after the meeting, G7 said it would take all necessary action to ensure the resilience of the banking system and markets, in order to avoid future economic imbalances, but also boost the economy. German Finance Minister Sch?uble said the deficit is too high, the main problem facing the world, G7 agreed to continue financial rectification.

As the key European countries the debt crisis of the Greek, the Deputy Prime Minister announced 911 Venizelos, Greece will be implemented including raising property taxes, including the complementary economic austerity measures, including the 2011 and 2012 often up to 4 square meters of new levy property taxes euro, the President, the Prime Minister and all other elected officials issued a wage less, requires the owner to get rid of the debt crisis, play a more active role. The purpose of the austerity measures, it is to reduce the fiscal deficit, the debt crisis should get much-needed loans.

European Central Bank Governing Council member, Bank of France (BankofFrance) President Noah (ChristianNoyer) said that Greece’s debt problem is not on any banking system constitutes a very serious risk. G7 meeting, also reached the decisive solution to the debt crisis of the European consensus.

G7, the more concerned about their own economy to the United States, President Barack Obama speech in parliament last week proposed a $ 447 billion program to boost employment, and urged Congress to cut the deficit to support the program.

However, Fed Chairman Ben Bernanke did not quite agree with the practice of asking Congress to reduce the deficit. In his speech, he mentioned the U.S. economic growth in less than half of 1% is difficult to significantly reduce the more than 9 percent unemployment rate. Although Bernanke said the second half of the U.S. economy may be slightly accelerated, but market analysts generally believe that the U.S. may be in the early Ming to introduce new economic stimulus.

From the current public information has been seen, may G7 has made a corresponding effort, but these efforts failed to remove market concerns, risk aversion has not been completely eliminated.

“Currency war” or imminent on Tuesday, the Swiss central bank intervention sudden strong appreciation of the Swiss franc, Swiss franc linked to the appreciation of the euro and set the upper limit, that set the minimum rate level of the euro against the Swiss franc to 1.2000, with the global foreign exchange market to a new shock. Swiss central bank also pledged the future may purchase foreign exchange without restriction.

Shen Nan analysis, G7 did not reach practical advice to boost the economy, will trigger a new round of “currency war.” As of 18:15 yesterday afternoon, the euro against the Swiss franc is still a 0.15% decline, but remained at 1.2 above.

This time the Swiss
move, Moody’s yesterday (912 days) report that the Swiss franc’s appreciation of the country’s banking cost/income ratio had a negative impact, but the Swiss central bank move, if successful, will be to avoid the slowdown in exports in the economy, especially in the case, asset quality problems that may arise, and the benefit of the country’s sovereign credit and bank credit ratings.

Generous in Switzerland after the intervention in currency markets, Japan’s finance minister also raised security to live soon, Japan would take decisive measures to deal with speculative movements in exchange rates, and hope G7 understand Japan’s position in the foreign exchange market. G7 meeting did not reach a consensus on joint intervention on the exchange rate, but for Japan’s unilateral intervention in currency markets has no objection is raised, showing G-7 may also believe that the yen will threaten the continued strength of Japan’s economic recovery.

Market analysis, it did not reach a consensus to support joint intervention in the yen’s strength yesterday, the dollar against the yen yesterday afternoon, below the 77.00 to 76.74,18 once about 15 minutes when hovering in the 77.05, down 61 basis points .

“Appreciation of the yen, exports to Japan resulted in greater pressure on the Bank of Japan intervened in currency markets, including other countries intervened in currency markets are a certain degree of rationality and necessity if the laissez-faire free market volatility, it may will bring the impact of the financial system. “Shen Nan on the” Daily News “reporter analysis, and sharp appreciation of the exchange rate depreciation may lead to the rapid flow of capital, the impact of the financial system stability.

Recently, the Australian trade minister said the country will not follow the example of Japan and the Swiss currency intervention to drive down the Australian dollar. Yesterday, while the Australian dollar would decline, that was almost 100 basis points or so. Shen Nan said that Australia do not need to intervene in the Australian dollar, Australian dollar is also likely to face the future depreciation.

Yesterday, the New Zealand Finance Minister British Gehrig (BillEnglish) also said that the performance of S $ exchange rate is too strong. New Zealand, also known as Federal Reserve Chairman Xibolade day, S $ exchange rate is overvalued, the strong Singapore dollar for the economy.

Shen Nan analysis, as long as the global economic recovery has not yet entered a stable orbit, while developed countries still to loose monetary policy, other countries would intervene in currency markets exist, and foreign exchange volatility will continue, “currency war” also inevitable.

Gains for the dollar in recent days, Shen Nan said, was mainly due to the global economic recession is expected to allow the market to hedge funds returned to the United States, pushing up the dollar. But the U.S. economic recovery is not yet clear itself, the United States would not intervene the exchange rate, but through liberal economic stimulus policies to achieve the desired effect.

Time yesterday afternoon, according to data of reporters, a total of seven U.S. currency rose, while the dollar index rose 8 basis points to 77.25, an increase to 4.63%.

“If the dollar continued to rise again, it will slow down to let the yuan appreciate, if that appreciation is a crunch, slowdown is undoubtedly a big plus, but if it is to adjust the structure, slowing RMB appreciation is less favorable . requires two terms. “Shen Nan told the” Daily News “reporter.

by Finance Online Sept 13, 2011

G7 meeting did not introduce substantial measures to smell smoke and then the global currency war

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