Analysis: G20 promises unlikely to end devaluation debate

Sat Feb 16, 2013 12:00pm EST
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By Jan Strupczewski

MOSCOW (Reuters) - Financial leaders from the world's 20 biggest economies may have promised not to devalue their currencies to help exports, but the pledge will do little to keep exchange rates stable.

While G20 finance ministers and central bank governors can promise not to devalue their currencies directly, there can be no guarantees while central banks are pumping money into economies to make them grow again.

"We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes," the G20 financial leaders said in a closing statement after meeting in Moscow on Friday and Saturday.

But it is precisely the ultra-loose monetary policy of the U.S. Federal Reserve or Bank of Japan, aimed at helping their domestic economies to grow, that depressed the dollar and the yen and sparked the whole competitive devaluation debate.

That trend is unlikely to change, something China and other key emerging markets were quick to warn against in Moscow.

Fed chief Ben Bernanke said on Friday that "the United States was using domestic policy tools to advance domestic objectives".

Tokyo in turn insists that the Bank of Japan's pledge to start buying unlimited amounts government bonds is purely to help its shrinking economy get out of recession.

The G20 agreed there was nothing wrong with such policies.   Continued...

Finance ministers and central bank governors pose for a family photo during a meeting of G20 finance ministers and central bank governors at the Manezh Exhibition Center in Moscow February 16, 2013. REUTERS/Sergei Karpukhin