G-7 says 'excessive' currency volatility hits financial stability
By Roland Jackson, AFPLONDON--The Group of Seven richest nations declared Tuesday that excessive turbulence in exchange markets hurts financial stability, in a move to calm talk of currency wars ahead of this week's G-20 talks in Moscow.
February 14, 2013, 12:36 am TWN
Japan's recent talk of monetary easing has stoked fears, especially in Europe, of a so-called “currency war” between the major economies in which policymakers seek to devalue their currencies to make exports more competitive.
Japan's promised measures have pushed the yen lower, making exports cheaper than its competitors, and prompted France to call for a debate and action to make the sure that the eurozone's exports were not put at a disadvantage as a result.
But the G-7 statement defended foreign exchange rates set by the market, despite the criticism by France and amid mounting concern about politically driven devaluations.
“We, the G-7 ministers and governors, reaffirm our longstanding commitment to market determined exchange rates and to consult closely in regard to actions in foreign exchange markets,” they said in a brief statement issued by G-7 president Britain.
“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” they added.
The G-7 statement was published ahead of Friday's G-20 meeting in Moscow, where exchange rates are expected to figure prominently after Japan took steps to boost its economy and exports.
Japanese Finance Minister Taro Aso rejected on Friday criticism that Tokyo was orchestrating a slide in the yen, a day after German leader Angela Merkel voiced concern over the new Japanese government's exchange rate policy.
“The criticism that (the government) is manipulating the currency rate is completely off the mark,” Taro Aso told journalists in the Japanese capital.
Aso's comments were the latest in a simmering row over Japan's currency, with critics saying Tokyo's pressure on the central bank for aggressive policy action amounted to meddling that could spark a global currency war.
In Brussels on Tuesday, EU Economy Commissioner Olli Rehn welcomed the G-7 statement.
“Excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability and that's why we have to lean on active policy coordination in order to prevent a wave of competitive devaluations,” Rehn said.
French President Francois Hollande has raised concerns about a recent rise of the euro, which makes exports more expensive.
He said last week that the exchange rate of the euro should not be left to short-term market forces, and commenting at a press conference on the G-7 statement on Tuesday he said “we must work so that exchange rates are not used for commercial purposes.”
Overnight, Washington had urged the Group of 20 economic powers, which holds a meeting later this week, to avoid competitive currency devaluation that would threaten global economic growth.
European Central Bank chief Mario Draghi meanwhile said on Tuesday that talk of currency war was “way overdone.”
“We are not witnessing anything like that,” Draghi told a news conference in Madrid after meeting with members of the Spanish parliament.
“You can see from the statement there is no declaration of currency war,” Draghi said, referring to the G-7 declaration.