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G7 and the yen

Currency rescue attempt begins. Will it work?
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Businessmen look at a share prices board in Tokyo on March 14, 2011, showing a drop in the markets following the first full day of trading after the deadly March 11 earthquake and tsunami. (Yoshikazu Tsuno/AFP/Getty Images)

The world's seven largest economies have made a bold decision following last week's devasting earthquake, tsunami and nuclear disasters in Japan.

The G7 is intervening on global currency markets to help stabilize and drive down the price of the yen, which had surged to levels that would make life much harder for stricken Japanese exporters.

In a joint statement, here's how the G7 explained the move:

“As we have long stated, excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability."

It's a rare move by the group, which includes the central banks of the U.S., the European Union, Britain, Canada and Japan. The last joint intervention on currency markets was of the euro, back in 2000.

Will it work?

The yen did fall from its highs on Friday, though many traders remain dubious that the G7 intervention can be sustained:

"European central banks have been intervening but it's not going well," a London-based sales trader told Reuters. "The intervention needs to be concerted and aggressive....and even then I'm skeptical," said another trader.

The rare move comes amid growing concern that Japan's ongoing and unprecedented disasters, already estimated at an economic cost of $200 billion, will significantly damage the world's third-largest economy.

Meanwhile, Japanese stocks jumped 2.7 percent in Tokyo today. Overall, Japan's market lost 10 percent on the week.

http://www.globalpost.com/dispatches/globalpost-blogs/macro/g7-and-the-yen-0