The finance ministers and central bank chiefs of
seven leading world economies said Tuesday that they would "not
target exchange rates," amid fears of currency wars prompted by a
devalued Japanese yen.
"We, the G7 ministers and governors, reaffirm our longstanding commitment to market-determined exchange rates and to consult closely in regard to actions in foreign exchange markets," they wrote in a statement.
The G7 members - France, Germany, Italy, Japan, Britain, the US and Canada - pledged to pursue their economic objectives using "domestic instruments," adding, "we will not target exchange rates."
"We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability," they wrote - repeating their long-established position on currency movements.
EU Economy Commissioner Olli Rehn welcomed the statement, and said it would likely be reiterated by G20 finance ministers meeting in Moscow later this week.
"Excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability, and that's why we have to lean on active policy coordination in order to prevent a wave of competitive devaluations," Rehn said in Brussels.
Last month, the Bank of Japan unveiled an expansionary monetary policy aimed at spurring its recession-bound economy with a weaker yen by boosting the export machine of the Asian powerhouse.
This prompted concerns from monetary authorities around the world that the Japanese monetary action might reduce the competitiveness of other leading currencies, consequently paving the way for a currency war.
Most recently, French President Francois Hollande has floated the idea of an exchange rate policy for the euro currency - a concept that has been strongly rejected by Germany.
"We don't have a problem with the eurozone," German Finance Minister Wolfgang Schaeuble said Tuesday, after a regular meeting with his EU counterparts. However he spoke of fears that "there could be an issue in other parts of the world."
The euro has strongly risen in value against the yen, the US dollar, and the British pound in recent months, increasing the price of eurozone exports and threatening economic recovery as the 17-member bloc emerges from the worst of its financial crisis.
The euro edged forward again in early Tuesday trading, rising 0.4 per cent to 1.3436 dollars.
Rehn said a strong appreciation of the euro would impact disproportionately on southern European countries with large deficits, whose exports were particularly price sensitive.
But French Finance Minister Pierre Moscovici said Tuesday that the debate was not about putting the European Central Bank under pressure to make "untimely interventions."
Instead, he said it was worth thinking, on a global level, about a "coordinated exchange strategy" to eliminate "erratic movements."
"It is these erratic movements that are negative for growth," Moscovici said in Brussels.
"Making exchange rates a policy target to gain competitiveness by any partner would be against the spirit of the G20 agreements, and we will remind our partners of this at the G20 meeting in Moscow," Rehn said.
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