Group of Seven seeks to defuse currency war fears

BRUSSELS - The Associated Press

REUTERS Photo

The Group of Seven leading industrial nations, which includes the U.S., Japan and Germany, sought Feb. 12 to defuse escalating fears of an impending “currency war”, warning that volatile movements in exchange rates could adversely hit the global economy.

There have been increasing concerns around the world that governments are manipulating their exchange rates through their domestic economic policies in order to get an edge over others. A lower currency can make a country’s exports cheaper, thereby boosting growth.

In a statement published on the Bank of England website, the G-7 finance ministers and central bankers insisted they remained committed to exchange rates driven by the market - not government policy - and would consult closely when it comes to sharp movements in foreign currency markets.

“We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability,” said the G-7, which also counts Canada, France, Italy and current president, the U.K., among its members.

The statement comes ahead of a meeting in Moscow at the weekend of finance ministers from the world’s top 20 industrial and developing countries. In light of the recent swings in the foreign exchange markets, notably relating to the Japanese yen, currency issues were expected to feature heavily during the Group of 20 discussions in the Russian capital.

The central bank of the host Russia, urged joint action to achieve balanced global growth and called on nations not to resort to trade protectionism and currency devaluations, according to Reuters reports.

First Deputy Chairman Alexei Ulyukayev also said he supported the statement issued by the Group of Seven rich nations on Feb. 12 reaffirming their collective commitment to market determined exchange rates.

“We share this view,”Ulyukayev told reporters on the fringes of a conference.