Leaders of the G20 major economies are due to meet in London on Thursday to review progress in tackling the biggest economic crisis since the 1930s.
The meeting could be a watershed moment as the nations are expected to promise not to fight the crisis by making moves that would harm the currencies of other nations.
In a draft statement, obtained by Reuters, the nations will specifically agree to “refrain from competitive devaluation of currencies.”
It seems likely the communiqué was drafted in response to the move made by our Federal Reserve which committed to buying long term Treasuries when they last convened earlier in the month. At the time, the move stirred worries that the sharp expansion of the Fed's balance sheet -- which had already doubled in size over the past six months -- would spew dollars into global markets and lead to an oversupply of the world's main reserve currency.
As you might remember, at the time Jeff Macke voiced concerns that the Fed's move could spark currency wars as nations rush to devalue their currencies to boost exports.
So, what does the meeting mean for the dollar and other currencies? For a trade we turned to Rebecca Patterson, director of foreign exchange and commodities at JPMorgan. Patterson tells us, she doesn’t think the G20 meeting will have any negative impact on the greenback. “The currency trade I’d recommend is buying the dollar and selling the euro.”
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