G7 expected to issue statement to cool currency rhetoric

Mon Feb 11, 2013 5:50pm EST
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(Reuters) - The Group of Seven nations are considering a statement this week reaffirming their commitment to "market-determined" exchange rates in response to heating rhetoric about a currency war, G20 officials said on Monday.

The language, which could be subject to change, implies that the major powers would not indulge in unilateral currency devaluation and reads very similarly to the last statement issued by the G7 on currencies in 2011.

"It focuses on a commitment to market-determined exchange rates and (governments) not using policies to drive currencies," one official said.

Two officials from different countries told Reuters that if agreed, the statement could be released around the time G20 finance ministers and central bankers meet in Moscow on Friday and Saturday. The G7 comprises the United States, Germany, France, Britain, Italy, Canada and Japan, while the G20 includes both advanced and emerging nations.

"The G7 has a long-standing set of rules of the game on exchange rates," U.S. Treasury Undersecretary Lael Brainard said in Washington at a briefing for reporters ahead of the G20 meeting.

"The G7 has long committed that exchange rates should float, except in rare circumstances where excess volatility or disorderly movements might warrant cooperation," she said, sidestepping a question on whether the G7 would issue a statement.

U.S. and European officials are concerned about comments from Japanese officials that suggest Tokyo is targeting a specific level for the yen. Japan's new government has pressed for an aggressive expansion of monetary policy, and the yen has lost 15 percent against the dollar since October.

Last week, France went as far as calling for a medium-term target to be set for the euro out of concern the exchange rate had become too strong. Berlin rejected that suggestion and said it did not view the currency as being overvalued.

French Finance Minister Pierre Moscovici said he and his euro zone peers would discuss closer cooperation on exchange rate policy at a meeting on Monday.   Continued...

Treasury Undersecretary for International Affairs Lael Brainard testifies at a House Financial Services Committee hearing on financial regulatory reform on Capitol Hill in Washington, June 16, 2011. REUTERS/Jason Reed