G7 finance ministers and central bankers are expected to demand that Japan halt its intervention in the forex market at its meeting this weekend. Earlier this week, US Treasury Secretary John Snow reiterated the US position on currencies; that they should be set in "open, competitive markets". Reports this morning citing a draft communique said the G7 countries would continue to monitor exchange rates closely and co-operate as appropriate, and strengthen dialogue between major economic areas to promote smooth adjustment of international imbalances. The Bank of Japan has intervened on numerous occasions in recent months to halt the yen's appreciation against the dollar, which it fears will hurt exports and damage its chances of recovery.
In the past six weeks, the dollar has lost 4.5pc in value against the yen - dropping to 115.10 yen from 120 -which will make it more difficult for firms such as Sony and Toyota to sell their goods in the US. But analysts say that the arguments for a weak yen have been undermined by the fact that Japan's GDP growth was higher than any other G7 country in Q2 and other G7 members will order it to curtail its yen selling. ///www.fxcentre.com