G-7 -- All hat, no cattle?

The G-7 made a big splash late Friday when it revised its statement on the dollar, saying:

"Since our last meeting, there have been at times sharp fluctuations in major currencies, and we are concerned about their possible implications for economic and financial stability. We continue to monitor exchange markets closely, and cooperate as appropriate."

I was intently curious, then, to see how the currency markets would react when trading in Asia opened. The verdict: The euro sank as low as 1.5672 against the dollar from a pre-statement level of about 1.5850. Other currencies also sank in value vs. the buck ... for all of a few hours. As I write, those moves have essentially been retraced in their entirety, or close to it. The euro is back up to 1.5871.

Why? The currency market is rendering a verdict that the G-7 is "all hat, no cattle." In other words, traders are saying: "Sure, you can talk up the greenback all you want. But the U.S. economic fundamentals are still weak. Moreover, you're not willing to back up your 'verbal intervention' with actual, coordinated intervention (dollar buying). So we're going to sell the dollar until you step up to the plate."