Pledge By G7 For Coordinated Intervention - was enough to make USD/JPY shorts cover. As you can see from the chart above that the announcement at 8pm last night by the G7 to intervene in the foreign exchange market for the first time since 2000 caused the Yen to plunge as market players covered their shorts. Japan’s Vice Finance Minister Fumihiko Igarashi said in an interview that he hoped the action would put a floor under the USD/JPY rate, while Japan’s central bank repeated its pledge to pursue “powerful monetary easing” as policy makers sought to reduce the threat of the world’s third-largest economy sinking into a recession. Further intervention is likely to occur during today's trading secession, with the Federal Reserve and the Bank of Canada expected to join in selling the Yen. Lost in the shuffle today was news that the United Nations Security Council approved the imposition of a no-fly zone over Libya and “all necessary measures” to protect civilians and an increase by China's central bank of bank reserve requirement ratio by 50 bps to 20%. Elsewhere, the GBP was down against the Euro after a report showed U.K. consumer confidence fell to a record low, fueling concern the economic recovery will slow. Also weighing on the GBP were dovish comments last night by Deputy Governor Bean, who was thought to be moving to the hawkish camp, suggesting no rate hike next month. Meanwhile, the G7 Yen intervention has put a bid in the dollar block currencies of CAD, AUD, and NZD and taken a little of the air out of the CHF balloon. In Canada, the CAD has moved higher due to the G7 intervention and on firmer oil prices due to the UN's no-fly zone over Libya, despite weaker than expected domestic inflation rate. Canada's annual inflation rate in February cooled to 2.2% from 2.3% in January and the core rate fell to its lowest level on record at 0.9%, which would suggest that there is less of a need for a swift interest rate hike by the Bank of Canada.
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