Investors in all major currencies have responded to expectations of what, exactly, will emerge from this weekend’s meeting, a gathering of top G20 finance ministers to set the agenda for the crucial semi-annual summit to be held in November in South Korea.
The agenda is important because the topics decided upon could very well determine the course of the global forex markets – and global economy – throughout the remainder of 2010 and into the first half of 2011. On the table for discussion and possible inclusion are debates regarding currency rates, specifically the Chinese policy of pegging the yuan to the dollar, and open market interventions from government entities.
Both main issues have affected realtime forex results for the past month, most notably with the announcement in the past week that the Chinese central bank raised its interest rates – a move that surprised most investors and caused a ripple through the forex markets.
Following the announcement on Tuesday, the dollar rose but others, mainly the export-heavy Aussie dollar, fell.
Japan and South Korea have also created news lately with a mini-feud over each country’s interventions in the forex market to essentially achieve the same goal: keeping their respective currencies low in order to preserve export-centric economies.
The feud has died down somewhat over the past few days after Japan and South Korea traded acidic barbs following news that South Korea has been intervening in the market to keep the won low. Japan has intervened once, on September 15th, to keep the yen from continuing to rise against the dollar, thereby hurting Japanese manufacturers and exporters.
There is no clear consensus as to what will happen this weekend, or what will appear on the agenda. There are a multitude of scenarios that could impact the markets further in the upcoming week. But as shown by this week, the possibilities have already impacted the market by increasing volatility and speculation.
The chief beneficiary of this uncertainty has arguably been the dollar, which is up for the week according to the USD Index (currently at 77.431). Realtime forex news for the American economy for the past has been largely mixed, with a better-than-expected weekly jobs report accompanied by a disappointing report on business activity from the Federal Bank of Philadelphia.