G20 vows to avoid more currency tensions

G20 vows to avoid more currency tensions

Finance ministers of the Group of 20 (G20) meeting in South Korea yesterday agreed not to weaken their currencies to increase exports and to allow markets to dictate the foreign exchange.

In a statement, the influential economic group said it will “move towards more market-determined exchange-rate systems that reflect underlying economic fundamentals and refrain from competitive devaluation of currencies.”

A separate meeting between U.S. Treasury Secretary Tim Geithner and Chinese Vice Premier Wang Qishan is scheduled today in Qingdao, China to discuss more about their currencies amid accusations of Geithner that China is not letting the yuan float in order to gain unfair advantage.

The G20 declaration is the first time for the finance ministers to put forth a joint stance about global exchange rates as they allay fears that countries from the U.S. to China are using undervalued currencies to jumpstart economic recovery thereby prompting a protectionist backlash.

The group postponed until next month on acting on a U.S. proposal for current account goals but the finance officials did agree that gaps should be more sustainable.

“The terms of the currency policy are so vague and broad that they can be interpreted into different meanings by each country as well as market players,” said Oh Suk Tae, economist at SC First Bank Korea Ltd. In Seoul.

“I’m not sure whether the currency war is over,” the economist added. “We need to see actions in line with the verbal vows.”

The G20 still considers the global economic recovery to be “fragile and uneven.”

Posted by James Fried on Sunday October 24 2010, 8:51 AM EDT. Ref: Bloomberg. All trademarks acknowledged. Filed under Featured News, Finance. Comments and Trackbacks closed. Follow responses: RSS 2.0