G7 Ditches Currency Communique

Forex Blog
October 4, 2009

[efoods]The semiannual meetings of the “G” countries – whether the G7, G8, G20, etc. – are always closely monitored by currency analysts. Especially close attention is paid to the official communique, which often includes an assessment of current exchange rates.

The communique is rarely so straightforward as to indicate if, when, and where the Gs will intervene. Nonetheless, it is often full of intimations, and analysts often spend days parsing its rhetoric for clues. During this period, it’s not uncommon for the forex markets to witness increased volatility, as investors try to come to consensus about what to expect in the months following the meeting. This is because unlike Central Banks, which often face difficulties in unilaterally trying to influence their currencies, the G7 is usually able to achieve its desired goal: “A study last year by ECB economist Marcel Fratzcher found the G7 was successful in moving within a year currencies on 80 per cent of the 29 occasions it tried to do so since 1975.”

However, the current meeting, which is being held in Instanbul, Turkey, may break from this tradition. It’s not clear exactly what motivated the (potential) decision not to release a communique, which has been an important policy tool for the last three decades. Perhaps, policymakers have realized that their are other, better forums to discuss currency issues, namely the G20, which met last week in Pittsburgh, USA.

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