Bank of Canada sees progress in G20 currency talks

Wed Oct 20, 2010 2:07pm EDT
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By David Ljunggren and John McCrank

OTTAWA (Reuters) - The Bank of Canada expressed optimism on Wednesday that G20 nations would eventually make progress in talks to defuse global currency tensions and it also had sympathetic words for China, which is under huge pressure to let the yuan float.

Finance ministers from the Group of 20 meet in South Korea this weekend amid increasing fears of a trade war in which countries would devalue their currencies to boost exports.

Bank of Canada Governor Mark Carney said that if mishandled, stress over currencies could undermine an already patchy global recovery.

"It may not look like we're actually making progress because we're getting down into the real policy decisions," he told a news conference after the release of the central bank's latest Monetary Policy Report.

"This discussion, which is spilling over more into the public domain, on exchange rates is getting more tangible as well. I think we just have to be more relentless on this, constructive in the room, and we will ultimately, we should ultimately, make progress," he said.

The United States, which has taken a hard line on the issue, said on Wednesday it wanted the G20 ministers to commit to allowing market forces to set currency values.

There is no sign yet the G20 will come to an agreement at the weekend talks. Washington and others, including the Canadian government, are unhappy about China's policy of only letting the yuan currency appreciate very gradually.

Carney took a softer line than Canadian Finance Minister Jim Flaherty when asked about China and currencies.   Continued...