The Group of Seven [G7] industrial nations agreed on Friday to jointly intervene in the currency market to restore stability to the greenback-yen/USD/JPY foreign exchange rate. Early on Thursday morning in Tokyo the Japanese currency rallied broadly. It surged more than 4% in less than an hour to Y76.25 per dollar, breaking the previous record high of Y79.75 set on April 1995, three months after the Kobe earthquake struck Japan.
The Yen — which, if it continues to rise sharply against all of its major counterparts would add to the economic pain of rebuilding after last week’s devastating earthquake and tsunami by hampering Japanese exports — has surged on talk of repatriation flows as the disaster to prevent a nuclear catastrophe at Fukushima Daiichi nuclear complex unfolds.[via Reuters] “Given yen moves after the tragic events that hit Japan, the United States, Britain, Canada and the European Central Bank have agreed with Japan to jointly intervene in the currency market,” Finance Minister Yoshihiko Noda told reporters. “When Japan is in such a state, it’s extremely meaningful for G7 countries to cooperate and take coordinated action to stabilise financial markets.”
The greenback spiked about 2 yen to above 81 yen on Friday, after the G7 agreed on joint intervention. The Nikkei share average was up 3.12% [.N225 9242.37 +279.70] in early trading. Currency traders expect Bank of Japan and other central banks to keep intervening if the dollar threatens to fall back below YPY80.00.