Forex Flash: Fed backs off allegations of currency war – Deutsche Bank

Following the G7's well-publicized statement yesterday calling for "fiscal and monetary policies that…will not target exchange rates", there were a number of subsequent conflicting statements. An unnamed official was quoted as saying that the G7's statement "signaled concern about excess moves in the yen. The G7 is concerned about unilateral guidance on the yen".

The official added that "Japan will be in the spotlight at the G20 in Moscow this weekend" (Reuters). The comments caused the JPY to gain around +1.4% against the dollar. However, another G7 official later commented that the statement was not about any individual country or currency, which helped the JPY pare initial moves upwards to finish -0.9% weaker on the day against the USD. According to Macro Strategy Analysts J. Reid and C. Tan at Deutsche Bank, “The Fed's Dennis Lockhart also weighed into the debate, assuring markets that we're not in a currency war in any sense.” He added that it's more important that Japan breaks out of its deflation cycle, which he described is "in everybody's interest".