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March 18, 2011, 9:43 a.m. EDT

G-7 intervening to halt yen’s post-quake rise

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By Sarah Turner and William L. Watts, MarketWatch

LONDON (MarketWatch) — The United States and Canada joined other Group of Seven nations Friday to sell Japanese yen as the world’s major industrial nations intervened jointly in the foreign exchange markets to help Japan cope with last week’s devastating earthquake and tsunami.

The Bank of Canada confirmed it sold yen for Canadian dollars as North American trading got under way. The New York Federal Reserve also sold yen for U.S. dollars, traders and a person familiar with the situation said.

Whether joint intervention will be effective in the longer term remains to be seen, but the dollar  surged versus the Japanese unit after the G-7 announced during Asian trading hours that members would move jointly to weaken the yen. The dollar traded at ¥81.15 in recent action, up from about ¥79.14 before the announcement.

Other currencies also gained sharply against the yen after the news. Read currencies story.

In a statement following a morning conference call, the G-7 said, “In response to recent movements in the exchange rate of the yen associated with the tragic events in Japan, and at the request of the Japanese authorities, the authorities of the U.S., the U.K., Canada and the European Central Bank will join with Japan, on March 18, in concerted intervention in exchange markets.”

Click to Play

Japan's tragedy so far

A week of devastation is covered in this one-minute video, with photos and video documenting Japan's powerful earthquake and tsunami. Video courtesy of Reuters.

The Bank of Japan was seen intervening on behalf of the Ministry of Finance in Asian trading hours to sell yen, with central banks in Europe joining the effort as European trading got under way.

“The Bank of Japan strongly expects that Japan’s concerted action with G-7 member countries in the foreign-exchange market will contribute to the stable formation of foreign-exchange rates,” said Bank of Japan Gov. Masaaki Shirakawa, in a statement.

“The Bank of Japan will pursue powerful monetary easing and, to ensure stability in financial markets, will continue to provide ample liquidity,” he said.

A spokeswoman for the German Bundesbank confirmed that the institution joined in intervention efforts during morning trading hours in Europe. The British Treasury, in a statement, said that, at its instruction, the Bank of England intervened in foreign-exchange markets in keeping with the G-7 agreement.

The Frankfurt-based European Central Bank, which manages the euro on behalf of Germany, France, Italy and 14 other nations, confirmed that it took part in concerted intervention Friday.

The G-7 is made up of the United States, Japan, Germany, Britain, France, Italy and Canada.

“I think we will see waves of intervention over the next 24 hours, which will keep pushing the price weaker for the yen against everything, but particularly for the U.S. dollar,” said Roland Randall, strategist at TD Securities.

“As far as I know, it’s very straightforward. They are literally intervening by selling yen and buying a basket of other currencies,” he said.

The G-7’s announcement of joint intervention came after a 9.0-magnitude earthquake and tsunami devastated Japan last Friday, killing thousands in what the Japanese government has called the country’s worst crisis since World War II.

The crisis isn’t over yet, as the country is still battling to stop radiation leaking from a crippled nuclear-power plant damaged by the earthquake and tsunami. Read more on nuclear threat.

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