LONDON- Japan may seem like a lonely voice in the Group of Seven pleading for some currency calm, but the rest may be taking more notice than first appears.
Nearly every other economic and political metric these days seems to have returned to the 1980s – so thoughts of significant G7 currency market intervention seem less outlandish against that backdrop.
The US dollar’s index has only recorded year-on-year gains at the current 20 percent pace on four other occasions since its historic surge in 1985 prompted the then G5 powers to collectively intervene to cap the rampant greenback.
Those four extreme dollar surges came during the early 1990s European exchange rate crises; the euro’s swoon in 2002/2001 after the launch of the single currency; the aftermath of 2008’s banking bust; and the oil collapse of early 2015.
At least two of those moments involved some form of G7 or G20 action to calm the horses.
Is there a case for it to happen again?
Reinvigorated as an effective governing council for the world’s major democracies at a time of fractious geopolitics, the G7 may have other more urgent battles to fight right now.
G7 finance ministers’ latest virtual meeting this month focused squarely on plans for a price cap on Russian oil as another sanction on Moscow for its invasion of Ukraine and as a way to limit soaring energy costs and the inflation that unleashed. (Full Story)
There was no discussion of the alarming acceleration of the dollar against Japan’s yen, the euro and Britain’s pound to its highest levels in decades – or the added stress that creates on dollar-priced energy imports into those countries, which in turn compounds both inflation and the economic hit there simultaneously.
Heralding growing yen anxiety in Tokyo ever since, Japan’s finance minister Shunichi Suzuki made repeated verbal protests against excessive currency moves on the sidelines of the meeting – adding he would coordinate any response with his allies.
Yet, no mention of exchange rates found its way into the very single-issue communique.
