The G20 is unlikely to break new ground on “currency wars” policy as officials begin a two-day summit. The Euro may rise on a large weekly LTRO repayment.

Talking Points

  • G20 Meeting Unlikely to Break New Ground on FX Intervention Policy

  • Euro May Recover if Weekly LTRO Repayment Exceeds Recent Trends

  • Yen Advanced in Asia as Stocks Fell, Muto Tipped for Top Spot at BOJ

A quiet economic calendar in European trading hours puts the spotlight on the start of meeting of G20 finance ministers and central bank governors in Moscow. While the recent focus on so-called “currency wars” has peaked on-lookers’ interest, the sit-down is likely to disappoint in terms of the ambition of its final outcome. Although policymakers are sure to offer plenty of lip-service to the importance of exchange rate flexibility, nothing concrete is likely to emerge as usual.

Indeed, with ever more countries adopting overt or de-facto weak currency policies, singling out individual offenders increasingly sounds like a case of the pot calling the kettle round and hot. The final communiqué will most probably restate the now-familiar general opposition to FX manipulation. This has been the status quo for some time and offers little impetus for directional momentum.

Elsewhere, the European Central Bank will announce the size of its weekly 3-year LTRO repayment. An amount that materially exceeds the €3.5-5 billion range seen over the past two weeks may boost the Euro as the liquidity drain drives regional yields higher. Needless to say, a particularly small repayment may yield the opposite result, although scope for such an outcome seems more limited.

The Japanese Yen narrowly outperformed in overnight trade, adding as much as 0.7 percent in overnight trade, as a selloff on Asian stock exchanges drove demand for the regional safe-haven currency. The MSCI Asia Pacific equity index fell 0.2 percent. A Reuters story claiming Toshiro Muto leads the pack to take over the as Bank of Japan Governor from Maasaki Shirakawa in mid-March may have likewise helped. Mr. Muto is perhaps the least dovish of the three front-runners tipped as likely to take over the central bank, according to The Economist.

Written by Ilya Spivak, Currency Strategist for


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