On April 17, U.S. Treasury Secretary Janet Yellen, Japanese Finance Minister Shunichi Suzuki, and South Korean Finance Minister Choi Sang-mok arrived at the U.S. Treasury Department in Washington, U.S., to attend a tripartite meeting on the sidelines of the IMF/G20 meeting. Arrived. 2024. Reuters/Kevin Lamarque
(1/3) U.S. Treasury Secretary Janet Yellen, Japan’s Finance Minister Shunichi Suzuki, and South Korean Finance Minister Choi Sang-mok attend the IMF/G20 meeting at the U.S. Treasury Department in Washington, U.S., on April 17. Arrived at the meeting. , 2024. Reuters/Kevin Lamarque buys license rights, opens in new tab U.S., Japan, South Korea agree to ‘close consultation’ on currency markets Trilateral meeting held as yen falls to 34-year low Rare agreement could increase the possibility of currency intervention – Analyst speaks out on the possibility of Japan’s coordinated currency intervention Bank of Korea Governor says Seoul has the means to smooth out currency fluctuations
WASHINGTON (Reuters) – The United States, Japan and South Korea agreed on Wednesday to “consult closely” on foreign exchange markets in their first trilateral financial dialogue, highlighting Tokyo and South Korea’s concerns over the recent plunge in their currencies. acknowledged.
The unprecedented warning by the finance ministers of the three countries comes as expectations for a short-term interest rate cut in the United States recede, causing the yen to fall to its lowest level in 34 years, and markets remain wary of the possibility of Japan intervening to support the currency. Ta.
A joint statement issued after the tripartite meeting said they “continue to work together to promote sustainable economic growth, financial stability, and orderly and well-functioning financial markets.”
“We also continue to closely consult on foreign exchange market developments in line with existing G20 commitments, recognizing the serious concerns of Japan and South Korea over the recent sharp depreciation of the Japanese yen and Korean won.” said.
After the statement, the dollar fell from a 34-year high of 154.79 yen on Tuesday to an intraday low of 154.18 yen. It was 154.24 yen in Asian markets on Thursday. Japan’s last intervention was in October 2022, when the yen was at 151.94 yen to the dollar.
Some analysts said the U.S. admission of currency concerns in Japan and South Korea could lay the groundwork for intervention.
“While I doubt a statement like this will be enough to push the yen higher and avoid intervention, the language used there is very strong and suggests that we will see some concrete action from Japan before the end of this week. I wouldn’t be surprised if it were announced,” said Helen Given, a currency trader at Monex USA.
The trilateral meeting, attended by U.S. Treasury Secretary Janet Yellen, Japan’s Finance Minister Shunichi Suzuki, and South Korean Finance Minister Choi Sang-mok, coincided with the International Monetary Fund and Group of 20 (G20) financial leaders meeting this week. It was held. In Washington.
Suzuki told reporters that she had a bilateral meeting with Yellen on Wednesday and that the Japanese government was prepared to take appropriate action against excessive movements in the yen, but did not provide details. .
Japan’s top currency diplomat, Masato Kanda, also based in Washington, said authorities would not rule out all options to deal with excessive yen movements.
He declined to comment when asked about the possibility of coordinated intervention to curb the dollar’s rise against other currencies, including the yen.
“Over the past few intervention cycles, U.S. authorities, especially Janet Yellen, have issued statements acknowledging Japan’s motives and offering verbal support,” said Karl Sciamotta, chief market strategist at Kopay. .
“From a strategic perspective, currency intervention is much more likely to be successful if achieved through a coordinated international effort. Unilateral moves can help reduce volatility, but long-term interest rate This is not enough to reverse the yen’s decline due to the difference,” Shamotta said.
Karita told reporters after the G7 meeting that the financial leaders of the G7 developed countries agreed to Japan’s proposal to reaffirm their commitment that excessive volatility and disorderly movements in currency markets are undesirable.
Effects are unlikely to last
Japan and South Korea have seen their currencies depreciate against the dollar in recent weeks, mainly as expectations for short-term interest rate cuts in response to rising U.S. interest rates have waned.
Despite verbal warnings from Japanese authorities, traders have been unable to push the yen down to around 155 yen to the dollar, a level seen as a red line in Tokyo that raises the possibility of intervention.
Bank of Korea Governor Lee Chang-yong said on Wednesday that authorities have the resources and means to smooth out volatile movements in the South Korean currency, suggesting he was willing to intervene in the market to boost the won.
“Our exchange rate has deviated a little from the level justified by market fundamentals,” President Lee said at an IMF seminar.
Financial leaders of the major G20 countries have long agreed that excessive or disorderly exchange rate fluctuations are undesirable.
The Japanese government claims that the G20 agreement gives it the freedom to intervene in foreign exchange markets to counter excessive movements in the yen.
However, intervention could be costly, and there is no guarantee that the current trend of dollar strength can be reversed, given the large difference in interest rates between the United States and Japan, which is close to zero.
Masafumi Yamamoto, chief foreign exchange strategist at Mizuo Securities, said, “We don’t know whether Tokyo will intervene just because the dollar exceeds 155 yen.”
“With the strong U.S. economy delaying the Fed’s interest rate cuts and boosting the dollar, authorities probably feel that unilateral intervention will not have a lasting effect,” he said.
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Report from Washington by Leika Kihara. Additional reporting by Saqib Ahmed in New York, Cynthia Kim in Seoul, and Satoshi Kajimoto in Tokyo. Editing: Chizu Nomiyama, Jamie Freed
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