Group of 20 finance ministers, meeting in South Korea have said that G20 members will plan an accord to stop “competitive undervaluation” of currencies in an attempt to stabilize trade and currency tensions which have been threatening to derail the fragile world economy.
Finance chiefs and central bankers are meeting in Gyeongju, South Korea and will releases a statement after talks conclude in October 23 that says G20 countries want “more market-determined exchange rate system that minimizes adverse effects of excess volatility and disorderly movements in exchange rates,” according to an anonymous official from the G20 meetings.
The G20 meeting is being overshadowed by the fears of currency wars and concerns that countries have been pursuing a lowered currency exchange rate in order to boost exports and help economic growth. China has been pointed out as an example of artificially keeping currencies low, while the UK and the US have been single out for using talk of quantitative easing to limit currency gains.
These kinds of behaviors risk a protectionist backlash from emerging economies who are trying to stay competitive, which could ultimately derail the tentative economic recovery.
The US is the driving force behind the G20 statement of accord, which they hope to be released either on the weekend with the conclusion of the finance minister’s meeting of the G20, or next month when the leader’s summit concludes in Seoul. The US is also trying to forge a united push from G7 members to lead the way in currency cooperation at the G20 summits.
