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Insight to All Things Currency and Treasury Management

By Wolfgang Koester

 

On April 13-14, the G20 will convene in Washington, D.C. for a finance focused summit. In attendance will be finance ministers and central bank governors from G20 member countries.

With a forum for the discussion of world currency, especially in light of the past years of heightened FX volatility, there’s bound to be some thought-provoking discussion on monetary policy strengths/weaknesses. Without a question, there will be discussions regarding which global currencies should (or shouldn’t) be devalued. Although the meeting is bound to be interesting, the truth is that we’re not expecting much to come of it.

Why?

Although the G20 is meant to be a medium for achieving (some) consensus, finance ministers from across the globe are all coming to the table with vastly differing points of view on the implications of the current currency market conditions. Each representative is coming with a (rational) goal of protecting the interests of their individual countries and, in the end, any currency decisions made by one single country will ultimately affect the other G20 members. While this isn’t necessarily a bad thing, coming to an agreement about which currencies should be devalued will naturally become a difficult discussion— one that, most likely, won’t conclude with any real decisions being made.

While the G20 did indicate that there would be some kind of a formal output/announcement to be released (one we’re thinking could involve details on attempts to calm the markets down), chances are it won’t have any teeth.

Interestingly enough, this ‘non-event’ could very well be intentional (see recent Financial Times piece on currency wars). In other words: A ‘non-decision’ on devaluation is part of a grander Central Bank plan driven by an effort to limit competition and stabilize currencies. For the bulk of us on the outside looking in, only time will tell.

Though we may not be expecting any big news on the currency front, what we do expect is that the Japanese will continue to defend the 110 level for USD/JPY. We’ll be paying attention to discussion details, any points of debate, and of course, to the opinions expressed by each representative in attendance.

Learn More

Interested in learning more about the G20, scheduled meetings, outcomes, etc.?  Visit the official website at www.g20.org or check back here at www.fireapps.com. We’ll keep you in the loop with important updates and what they could mean for your international business.