G20 set to dilute big powers' demands on currencies

Fri Feb 15, 2013 3:20pm EST
 

By Jan Strupczewski and Tetsushi Kajimoto

MOSCOW (Reuters) - The Group of 20 nations will not single out Japan over the weak yen and will disregard a call from G7 powers to refrain from using economic policy to target exchange rates, according to a text drafted for finance leaders.

A G20 delegate who has seen the communique - prepared by finance officials for their bosses - also said it would make no direct mention of new debt-cutting targets, something Germany is pressing for but which the United States wanted struck out.

If adopted by G20 finance ministers and central bankers meeting in Moscow on Friday and Saturday, Japan will escape any censure for its expansionary policies which have driven the yen lower and drawn demands for action from some quarters.

"There will not be a heavy clash about currencies in the end, because nobody can risk such a negative signal," said another G20 delegation source.

The currency market was thrown into turmoil this week after the Group of Seven - the United States, Japan, Germany, Britain, France, Canada and Italy - issued a joint statement stating that domestic economic policy must not be used to target currencies, which must remain determined by the market.

Tokyo said that reflected agreement that its bold monetary and fiscal policies were appropriate but the show of unity was shattered by off-the-record briefings critical of Japan.

The G20 draft merely sticks to previous language on the need to avoid excessive currency volatility, the delegate said.

The yen has fallen by around 20 percent since November. Having firmed earlier on Friday, it turned tail and dropped about 0.6 percent against the dollar and euro in response to the communique details.   Continued...

 
France's Finance Minister Pierre Moscovici (L) and Britain's Chancellor of the Exchequer George Osborne (2nd L) walk past a wedding car at the Ritz Carlton hotel in Moscow February 15, 2013. G20 officials struggled to find a common form of words on currency manipulation ahead of a summit on Friday at which divisions within the group over growth versus austerity looked set to flare back into life. REUTERS/Sergei Karpukhin