Yen declines as G7 starts intervention

The Associated Press

The yen fell from historic highs Friday after the Group of Seven major industrialized nations promised coordinated intervention in currency markets to support catastrophe-stunned Japan’s recovery.

Later in the day, the U.S. Federal Reserve Board and the central bank of Canada announced they intervened in the market in a bid to curb the yen’s rise by selling the Japanese currency.

The G7 pledge came after the yen hit an all-time high against the dollar Thursday, possibly threatening Japan’s exports and hampering its economic recovery from the March 11 quake that triggered an unfolding crisis at the Fukushima No. 1 nuclear power plant.

After the G7 announcement the dollar rose to ¥81.26 from ¥79.45, but it was unclear whether that was due to government intervention or to traders reacting to the news. The dollar briefly slumped to ¥76.53 Thursday — an all-time low for the U.S. currency and a record high for the yen.

Finance Minister Yoshihiko Noda had said the government would intervene in the Tokyo market once morning trading opened Friday. But ministry officials declined later to confirm whether that happened.

Noda said the intervention was to calm “volatility” and G-7 governments had no target exchange rate.

“We are not aiming for a specific level,” the minister said.

The G-7 statement adds to a flurry of moves by calamity-hit Japan to calm roiled financial markets. The Bank of Japan welcomed the initiative. The central bank has tried to calm jittery money markets by injecting ¥38 trillion in emergency cash this week on top of its regular funding activities.

The Nikkei 225 stock average closed 2.72 percent higher following a turbulent week of trading amid the escalating nuclear crisis.

Smoke continued to billow from a building at the crippled Fukushima nuclear plant Friday as emergency crews worked to re-connect electricity to cooling systems and spray more water on overheating nuclear fuel at the tsunami-hit facility.

In a joint statement issued after emergency discussions, the G-7 officials said the United States, Britain, Canada and the European Central Bank will join with Japan in “concerted intervention” in currency markets Friday. It would be the first time since late 2000 that the governments have jointly intervened in currency markets.

“We express our solidarity with the Japanese people in these difficult times,” the statement said.

Noda expressed Japan’s gratitude.

The yen’s recent rise was driven by expectations that Japanese firms would sell dollar-denominated assets and buy yen to pay for quake recovery. Traders said there was no sign of that happening, which meant government intervention might be able to discourage further speculation.

“Intervention was inevitable for the Japanese authorities. That was the general thinking in the market,” said Masafumi Yamamoto, chief foreign-exchange strategist at Barclays Capital Japan. He called the G-7 statement a “strong message.”

Yamamoto said the G-7 pledge of cooperation was a striking contrast to last year’s talk of possible “currency wars” and governments trying to weaken their currencies to shore up exports amid the global crisis.