Dollar, Yen Vulnerable if G20 Softens Tone on Debt Reduction

The US Dollar and Japanese Yen are likely to fall further if G20 officials soften their tone on the need for fiscal austerity, boosting risk appetite.

Talking Points

US Dollar, Yen to Fall if G20 Softens Tone on Near-Term Debt Reduction
Japan’s Fin Min Aso Says G20 Counterparts Don’t Object to BOJ Stimulus

A quiet economic calendar through the end of the trading week keeps the spotlight on a meeting of G20 finance ministers and central bank governorsin Washington DC. The Japanese Yen sank overnight after Finance Minister Taro Aso said his counterparts did not object to the country’s aggressive monetary easing during the first day of discussion. The remarks also offered a lift to Asian stocks, sapping haven demand and weighing on the US Dollar.

As we discussed yesterday however, the traders are likely to be most concerned with commentary relating to the state of the global recoveryin the context of mounting concerns that erupted into large-scale risk aversion at the start of the week. The central point of discussion on this front is the pace and timing of fiscal austerity efforts, with a focus on recent efforts in Europe and the US. A softer, more growth-friendly tone on the need for near-term debt reduction is likely to boost risk appetite and compound downward pressure on haven currencies.

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