G20 Moscow meeting – final Communique

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Here’s a link to the final Communique from the G20 meeting:

Meeting of Finance Ministers and Central Bank Governors
Moscow, 15-16 February 2013

Also here: Сommunique of Finance Ministers and Central Bank Governors, Moscow

For a summary, here’s Reuters with the key passages: TEXT-Main points of final G20 finance communique

As expected, there is no specific mention of Japan or Japanese policy. In brief, if policy is aimed at achieving results in the domestic economy then its OK. Of course, it is difficult to gauge whether domestic policies are, or are not, aimed at weakening the currency.

Author: Eamonn Sheridan

Eamonn Sheridan worked with Bankers Trust Australia for 13 years as a Spot foreign exchange dealer, trading across all major currencies and all time zones. He rose to a Vice President position, running spot operations during the busy European time, leaving the bank just prior to it being sold to concentrate on running his own business in the ‘real world’! The markets, however, had him hooked – he continued to trade equities, CFDs and then on to futures, giving him broad experience across financial markets. He is now active in FX and equity index futures as well as writing for ForexLive™. Eamonn is a graduate of The University of Melbourne in Australia and lives in New South Wales.


All|Asia Pacific


Eamonn Sheridan


  1. Some think that it contains a warning to Japan, while others say that it gives green light to Japan. Another beautiful document for the forex market to play with, while everyone is attempting to analyze the different interpretations^^

  2. Hi Mr. Eamonn
    do you think that yen will stengthen short period ?

  3. G20 talks cant influence any currency. YEN is way overvalued for decades. It needs to correct to 150 or more. Same with CHF and CAD. The most undervalued is GBP. Needs to correct back up. USD is also undervalued somewhat. Aussie & kiwi brother can be said to be fairly valued. The laughable is China Yuan. This one is crazy undervalued..haha. Just laugh when everyone talks about Japan when indeed they,ve been cheated for years

  4. .

    “With unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see,” Bernanke said, according to Bloomberg News. “The U.S. is using domestic policy tools to advance domestic objectives.”

    The Fed is now engaged in its third round of quantitative easing, or QE3, buying $85 billion worth of Treasury and mortgage-backed securities a month, in addition to keeping short-term rates near zero.

    Bernanke added: “We believe that by strengthening the U.S. economy we are helping to strengthen the global economy as well.”

    Japan made similar contents – “If the Japanese increase their domestic demand it will help Indonesia, especially from the export side,” said Hartadi Sarwono, deputy central bank governor, Reuters reported.

    So – I wonder – isn’t the logic here similar to the one in the trickle down economics? If you reduce our taxes to 0, we will employ more people/buy more products – everyone will be happy!

    Having seen the impact of trickle down economics – it’s quite clear that logic really does not compute. Trickle down economics is really good only for those who get the primary benefit in the form of lower taxes, but that financial improvement does not in any way ‘trickle down’ to those who do not get similar benefits.

    The point being – the arguments made by the US and Japanese governments are flawed. What’s good for them is really only good for them, not for necessarily for everyone else. If US economy were to get worse, and its currency to rise, it would lead other nations to become major economic powerhouses –

    In fact, one could argue that Japan’s fall led to the major rise of South Korean electronics/car industry. In other words, if US and Japan continue their easing programs, it will be great for them, but it will cause everyone else to suffer (except China – since everything is made in China anyways^^)

    I guess in the end, it’s all about creating an illusion of ‘if you give me an apple, I benefit and you benefit by feeling good about yourself’ – where the reality is, if you give that person an apple….. you just lost a freaking apple and you’ll never see it again^^

    And so…. the currency wars continue. Once this round ends, I expect Australia, New Zealand, Canada and other nations to start their own currency easing attacks. Where their arguments will sound quite similar – and so the cycle continues.

  5. Clarke – I agree that everyone has been or is doing this. Free market has never really been free market, as otherwise there would be nations on the brink of bankruptcy because the market has picked their currencies as safe havens, thus increasing their values to an extent where their export industry pretty much dies (chf/jpy).

    China is simply doing what everyone else is doing – just without partaking in the ‘free market’ charade that really is just charade.

  6. Maher: what the market had hoped for was this –
    “The Group of 20 nations will not single out Japan over the weak yen and will disregard a call from G7 powers to refrain from using economic policy to target exchange rates, according to a text drafted for finance leaders.”

    While the first bit was true – Japan was not singled out, the second bit was untrue – there was a clause in the official document stating that g20 nations will not target specific exchange rates to boost their competitiveness.

    I think the second clause makes this a somewhat negative for yen crosses –
    That is, we may hear 20 different interpretations of this document next week – perhaps initially some will say that this document did not in any way refer to Japan, while later on (when usdjpy reaches 95), sone…. haha.. anonymous figure will come out and say that the clause regarding the exchange rate targeting was a direct warning to Japan and then usdjpy will crash. That’s how circus works.

    Of course, there is a possibility that the negative interpretation will come to light as early as sunday/monday, in which case 95 figure won’t be seen for weeks to come.

  7. “The market will take the G20 statement as an approval for what it has been doing — selling of the yen,” said Neil Mellor, currency strategist at Bank of New York Mellon in London. “No censure of Japan means they will be off to the money printing presses.”

  8. What is going to happen onMonday eurusd?is it going up or down?any ideas?thanks.

  9. 100% agree clarke

  10. http://online.wsj.com/article/BT-CO-20130216-700919.html

    But Mr. Aso stressed late Friday that Japan has no target for the yen’s exchange rate, and that the currency’s weakening was a side effect–not an aim–of the country’s stimulus policies.

    Yet, every potential BOJ governor candidate talks about 95-100 level and no mention of deflation. Abe has mentioned 90-100 a few times as well. Aso, explain that one.

    It’s like matrix^^

  11. Hi Maher – yes, looks like nothing to stop more yen weakness in the short term

  12. G20 statement is classic waffle designed to please anyone wishing for a soundbite to take back to their electorate .. politics 101. the line is basically that nobody should directly target a currency .. japan’s line is that they arent directly doing this anyway. most of the G20 either have manipulated their currency in recent history or are perhaps thinking of going down the same road so they cant take a tough stance on this without looking ridiculous. all the policians want is to take meaningless quote back home to fend off domestic critism .. and theyve got it so these useless buggers are happy.

    now this is over .. risk on USDJPY/EURJPY can be put back on the table. the japanese will get back to work talking yen down as a new BOJ governor is nominated. reckon monday .. USDJPY tests 95 handle … a break and i think we move toward a 100.

  13. thanx max for your reply.
    i know the yen is still not cheap. and it will go later this year to 100 and more. but we must not forget that the yen has gone from 78 to 94 without significant correction.all countries are not commenting on the price of yen but they are commenting on the rapid depreciation because PM Abe was talking every day on yen . and from g20 statement i think he will stop talking on weakining the currency.
    also on friday the yen goes from 92.50 till 93.50 just because g20 will not make commitment on targetting rate but this is not true as we see today. so that is why i am thinking of big correction in coming week till 90 and it will go lower if stocks tumbles.

  14. thanks Eamonn

    but on friday the yen goes from 92.50 till 93.50 just because g20 will not make commitment on targetting rate but this is not true as we see today. so that is why i am thinking of correction.

    or the market wait fake news and make it an excuse to sell the yen. and when the real news comes in they will interpreted differently and sell it again.

    really markets are understandble these days.

  15. sorry
    markets are really not understandble these days :)

  16. Maher, I agree that correction is coming and it may come either immediately this week, or it may first reach 95 prior to the big correction.

  17. @max there will always be corrections which is unpredictable. What is important for a serious trader is the primary trend which I believe will be up in yen crosses for a very long time to come. Been lucky enough to be long yen crosses and yen related stocks since usdjpy 77 one of my biggest “meat” ever ! I will continue to ride it though. I am not interested in politics or Abe talks. What is seen from the chart is that YEN is massively over valued without which S.Korea and China wont be talking about economic miracles. The unwinding is on and no government is able to control this move. The same will happen with CHF one day too. I am long big on that crosses as well especially with euro, usd and sterling

  18. Clarke: the move down will only be a correction. I also expect the trend to continue moving higher – much higher in medium/long term.
    The ‘no government is able to control this move’ statement is untrue.

    Anyways, right now there’s another currency which gave a perfect signal – a signal which has long term implications. usdgbp – it broke the multi-year wedge – and the break was legit, as even weekly charts confirm it. So, at this point, usdgbp is another great pair to invest in – sell it until it drops 20 cents or lower (though I suspect that may take a year or longer).

  19. The trend is up in usdjpy but the point about no pull backs is not true .. there have been retracements all the way along .. but perhaps not as deep as some had hoped .. just last week we had a 250 pip retracement .. why would we see yen strengthen next week? Have the boj governor nomination to help .. if iwata I reckon yen gets smoked ..

  20. Let me give you guys a clear thinking and understanding of the yen right here. 85-90 was what Abe was pursuing during his pre-election. So while USD/JPY was still chasing 90, it came down the low 88 when the market was disappointed with BOJ choosing to delay t further action till 2014. From that point 88s, the Japanese government came in to talk their way up to 90. From this point, we can tell that the Japanese government will act once USD/JPY falls near to 88.
    Next up within the 90-95 range, we have clearing seen from last week that the Japanese government again talk their way into yen at near 92, so it is pretty much the logic that applies to the 88 when it was still ranging in the 85-90 range.

    Now the big stuff:
    95 will not warrant a correction in my opinion in my opinion as it is still not weak enough for the yen. a 100 will instead warrant a correction as what that is what the government and market is expecting. 110 – 120 will only affect import prices in Japan, hence if it does go to 100, there is still 1000 pips more space to weaken the yen so the correction at 100 will be big but not big enough. After the correction from 100, we will see USD/JPY rally again to hopefully 110 or 120 and this time we could really see a big correction.

  21. So what will prevail now? The usual market practice of going against the majority or the will of japanese of Govt?

  22. Japanese ‘competitive currency devaluation’ approved
    long yen crosses people………jussayin’ ;)

  23. @ gops – It really wouldn’t surprise me if we saw “the market going against the majority”! With all the “news” over the weekend regarding G20 & BOJ etc, even the non trading, Jo public [world wide] will be willing to take a punt at what, on the surface, looks like a sure fire, one-way bet… It probably will be, but not until said punters have been unceremoniously “washed and rinsed” out of the game, perhaps after an initial rise in USD/JPY, to lure in as many ‘bets’ as possible. I do not believe that George Soros and the like have been ‘advertising’ their [perhaps former] positions for the good of their health. Those in the know at BOJ and their ‘associates’ will inevitably be looking to shall we say ‘take advantage’ having made vast sums between 10am & 3pm GMT on Friday!!! On the other hand…….;0)

  24. Anand – when you look at the 4 hour chart, you may see big corrections, while the weekly chart shows no correction at all. Every chart needs to show correction, not only the short term charts

  25. @max As for the wedge on sgd that may be a profitable trade. Unfortunately I am not a technical trader. I also look at individual currency/country not the pair to make my decision. Now I can say that sgd is 6.5 within 0-10 ( 0 =undervalued, 10=overvalued). I trade very few positions per year though I bang for thousands of pips. Therefore I take my time.

    On the YEN, truly I am surprised how analysts comment on this move. It shows to me that they dont understand forex at all. The two countries that a massively undervaluing their exchange rate for potential economic advantage are China and Britain. Unfortunately while China actually have something to export and therefore reaped, Britain got nothing to sell so could suffer stagflation.

    It will be very unfair to point at Japan. YEN had been overvalued for decades with worsening economic fundamentals and natural disasters. This country has been in deflation for decades so are doing all it can to come out of it by raising target for inflation to spur growth including exports. Japan is the engine of worlds advanced manufacturing/components. Cheaper Japanese products is also good for the world .

    Another thing most people forget is carrytrade. The reverse carry just ended and another carrytrade just begun. Japanese rate will not increase anytime soon. Borrow ( sell) YEN to Buy asset( buy) USD or AUD or NZD or PESO or WON even EURO. This is likely to last for some years

  26. At the same time, I would not be surprised if we were to consolidate for the next two weeks, until march.

  27. max … why does every chart need to show a retracement? if i showed you a chart with 1 candle for 5 years going back over decades would you need to see retracements on this to take your point to an extreme? genuinely interested as a technician on your point ..

    ive been watching yen on a 1 second basis .. and there have been some brown pants jobs along the way for people short yen .. moves last last week would have shaken a lot of skittish traders out of the market ..


  28. Clarke: I was commenting on gbp…. not sgd^^

    As for the yen – it appears that nations do not have issues with Japanese fiscal policies per se – it’s the calls for specific yen levels that are an issue.
    Furthermore – how are cheap Japanese products any better than cheap Korean products? Lower currency helps one nation to compete (or dominate) other nations, but it doesn’t necessarily help the world (especially of that nation begins to dominate, thus causing other nations’ economies to decline rather than improve).

    Again, this discussion is rather similar to trickle down economics – which has been proven to be bull.

    Would I want Japan to suffer further economic decline? No. Would I want other nations’ economies to decline? No. It’s all about balance – but usually there is no balance, but rather swift changes which cause one nation to go bankrupt and another to come out of one. I guess the point is – if Japan wanted to be honest, it would have said,
    “We need to improve our competitiveness and revive our economy. Yes, our policies will cause our competitors’ economies to decline, but at this point, we need to think of our own people and not those overseas.’
    There is nothing wrong with that statement – it’s honest and true. Would China benefit from Japan’s revival? No – because then it would lose manufacturing orders from Japan’s competitors.

    The only reason why Japan make the ‘honest’ statement is because it does not wish its competitors to start a swift devaluation of their own currencies in response to Japan’s strategic move.

  29. Anand: Why must there be a retraction? Because there is always a retraction –
    I’ve said this before – the one question that traders have to ask is whether this trend is similar to the one we saw in 1995 (4000 pips prior to a retraction) or 2000.

    I’ve also stated why I believe that this trend will be more akin to the one we saw in 2000 – since the major rise in 1995 occurred only after a sudden major drop (2000 pips below the 200 day average). In the usdjpy pair, we saw no such drop, thus a rise of 4000 pips without a retraction is by far less likely (not impossible – I agree with you there, unless you are saying we’ll go another 90000 pips without retraction on the weekly chart^^)

  30. Asking ‘why must there be a retraction’ is akin to asking ‘why must human beings walk’. It’s true that we can try to jump and fly…. ^^

    History dictates that there is always a retraction. The only question is: when?

  31. @max ok usdgbp or gbp is consistent with my thesis that it is massively undervalued and will correct. Building positions on it for many months now. I like pairing it with cad and/or aud. May take months but gonna pay very big

  32. Max you misunderstood me ..my point is there have been retracements on a shorter time basis .. On a weekly it looks like a straight line but this is deceptive ..

  33. “…exchange rate flexibility to reflect underlying fundamentals, and avoid persistent exchange rate misalignments, and in this regard, work more closely with one another so we can grow together.”

    “…disorderly movements in exchange rates have adverse implications”

    “We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes…”

    Well, it made really no sense from the beginning that they would mention Japan specifically, so no surprises here. But these statements aren’t really supporting another fast short-term Yen down move of the same kind either. Let alone an accelerating one.

    Japan can’t afford an overly weak currency either. In fact, it can rather afford an overly strong one over an overly weak one. Highly efficient automated manufacturing can offset the negatives of a strong currency. Strong currency enables to reap the benefits of productivity through decreasing input costs. German companies remained highly profitable with a steadily appreciating DEM too. The multi-decade uptrend isn’t just all chronic deflation.

    Of course, things have changed for Japan with the earthquake drastically. But the resulting situation also serves as a reason why they can’t allow a runaway Yen weakness for now. Obviously, the turbulence that might cause wouldn’t be beneficial to global growth either.

    Probably, the main issue for the most was the rate of the move. This is actually pretty clear in the statement. Kind of true isn’t it? The market really juiced almost everything since the Nov. 16 bottom.

    So expect Japanese politicians continuing trying to make sure the Yen is only correcting excessive strength and possibly further hinting at the 90-100 range for the fair value. This should prove the point, that they’re keeping an eye on the downside too. I don’t think these things could be read as intention for more devaluation. (And easing and devaluation are not necessarily the same thing.)

    If the BoJ or similar market participants were selling Yen recently, I would except them to back off a bit now. The price action influences perception and thus it can influence confidence, so they might want to let things settle down a bit. China will be back from holiday so there might be even some Yen demand in store due to business activity?

    Not sure 95 will be that easy and the odds for 100 this month seem very low. I would expect a range of 92.25-94.40 for the next two weeks that might break either side, but without real follow through.

  34. One for those correlations :D

    Broadly expected support of 92.25 held on Friday, just like a similar resistance of 1.0370 in AUD/USD, so trading seemed rather technical (93.80 held too like clockwork at 17:00 GMT and then eased back).

    Dollar strength that kicked in around 14:00 GMT sealed those deals while gold was falling hard too. I wonder whether the gold move was a primary feature of Friday’s market. Falling gold in Yen terms doesn’t seem like Yen panic selling, does it? AUD likes to move together with gold. NZD likes to move together with AUD an it was also pretty high vs. the USD.

    If you wanted to knock down gold to shake out weak leveraged longs, wouldn’t it be helpful to buy/sell into such good technical constellations to help dollar strength while you’re shorting gold?

    (Or the other way round, if you were a genuine seller of gold, why would you sell the exact hour the dollar spikes? You’d work against yourself, because higher dollar usually means lower gold and you would sell into an already falling price and further deteriorate the price you can sell at.)

    If so, can the knockdown in gold continue? Probably not extremely long, cause if the price gets too low, China might drop by and buy some up before you, as it is back in the market again. China likes to buy AUD and NZD too. (Of course it might as well wait till there’s blood on the streets.)

    If there’s some gold and AUD buying this week and the correlations of last week continue to exist, it probably won’t be very easy to continue into Friday’s direction very fast (cause we were working on reverting it). This might also make leaving 95 behind difficult for now.

  35. Clarke: I’d be weary of being long gbp in the medium/long term – though if talking about 2-3 years down the road, I suspect that you are right and gbp may return to the level we are at right now.

    As for now – I expect gbp to crash around 20-30 cents lower in the next year or two – especially when the scotland referndum fuzz kicks in (which is when you’ll start thinking that maybe gbp is not so undervalued after all).

  36. @max I really like it when there are so much negativity. I truly do. That have made me big buck consistently. When GBP rises everyone will jump in expressing surprise. One thing that one must give to Brits is that the fiscal authorities are damn serious to do what it takes. All hands are on deck here. Scotland will not leave the union. That I am 99% sure. I am here on the ground..lol

  37. Well – I just don’t take multi-year trend breaks very lightly. A similar break occured in eurjpy pair a few months ago and what we are seeing now is a result of that. Anyways, trade safely- cheers

  38. clarke,

    I’m sorry, but I don’t know why you believe that USD/JPY is so oversold, and why GBP is so undervalued.

    You know, USD/JPY has been below 90 for years. Things don’t happen without a reason. There was a reason for JPY to be that strong, and I believe that the reasons are still in place.

    Regarding GBP, look at the british economy. There is nothing to be bullish about. Yes, I agree, there has been a huge sell-off recently, but this doesn’t mean that GBP should be much higer. The british economy is a mess, and Carney will make it even worse. It will take decades for the UK to get out of this mess.

  39. @Asier I see what you are saying. But if you watch cycles you will understand what I mean. Economy is not necessarily expressed in exchange rate. You noticed that FTSE is on tear while GBP is weakening. Wont be months before you see gbpusd at 17000

  40. @clarke

    Which one is odd one out? I believe FTSE. If you look at the macro data, EPS, etc. you will see that there is a huge euphoria building in stocks. Now, think to yourself, is the economy better now than in 2007? Why is then that most stocks are in multi-year highs? Russell 2000, for instance, is at all time high. It just doesn’t make any sense. Wait until all this implodes…

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