A chance for a new Plaza accord? – Commerzbank
|The Japanese government wants a stronger Yen (JPY). It seems fairly clear that the Japanese Ministry of Finance (MOF) has intervened several times in recent days to support JPY. At the same time, there is a high probability (even this morning!) that a future US government wants to see a weak US Dollar (USD), Commerzbank’s FX strategist Ulrich Leuchtmann notes.
A possible policy coordination between the Fed and MoF
“This is a rare case in which the governments on both sides of the USD/JPY pair are in agreement about the direction in which they would like the market outcome to change. In technical jargon, this is called 'international policy coordination', although that word literally could be understood in many different ways. Economists mean this.”
“The great example of international policy coordination is the Plaza Accord, the agreement of the G5 finance ministers and central bank governors (USA, Japan, Germany, France, UK), who met at the Plaza Hotel in New York on September 22, 1985 and agreed to weaken the US dollar against the other four currencies by means of intervention. Followed by a Louvre Accord of the G6 (including Canada) when they had to decide that the USD devaluation should be enough.”
“Whether this was it or not, economists have come to the conclusion that international policy coordination is a bad idea. But I now fear that every generation repeats the mistakes of the past, because they only learn from their own failures and do not draw lessons from the experiences of their elders. That's why I don't want to rule out the possibility that there could be a repeat of “Plaza 1985” after 40 years.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.