18 Mar 2011

G7 intervenes to help yen

10:20 pm on 18 March 2011

The Group of Seven industrialised countries has agreed on a co-ordinated intervention to try to stem the rapid rise of the Japanese currency, following last week's devastating earthquake and tsunami.

Japan blamed speculators for the sharp rise, because of expectations that Japanese insurers and firms would start bringing money home to pay for claims and reconstruction.

After news of the G7 agreement, the Nikkei 225 stock index rose 2.7% to 9,205.67, while the yen weakened against the US dollar to 81.21.

The yen hit a post-World War II high of 76.25 earlier this week, raising concerns about Japan's recovery.

Also on Friday, the Bank of Japan said it would pump another 3 trillion yen into the financial system, bringing the total cash injected by the bank this week to 37 trillion yen.

ANZ New Zealand chief economist, Cameron Bagrie says the G7 group has taken the correct action, as the damage suffered by Japan should have depressed its currency.

Good news for NZ

The New Zealand dollar has reversed some of its losses of recent days after intervention by the G7 countries.

The Kiwi gained about 1 cent on Friday afternoon against its American counterpart, shortly before 5pm buying 72.9 US cents.

It hit a six-month low against the greenback on Thursday after speculation built that Japanese investors would sell foreign currency to fund rebuilding.