OTTAWA/LONDON, Nov 14: Global tensions over currencies are growing and will dominate this weekend’s meeting of the Group of 20 nations, but any coordinated action plan is unlikely, British and Canadian policy-makers said on Wednesday.
The US dollar has fallen sharply in recent weeks, exacerbating concerns for exporters outside the United States.Officials from the United States, Europe and Canada are singling out the tightly controlled Chinese yuan as one major currency that has not made a fair adjustment to help rebalance global trading conditions.
“The difficulty with the world economic system at present is that a number of G7 economies have flexible exchange rates and those are moving. Others, like China, link theirs to the dollar and that’s causing great currency tensions,” said Bank of England Governor Mervyn King, referring the Group of Seven leading industrialised countries.
“I came away from the IMF meeting more concerned about these tensions,” King said at a news conference. G7 policy-makers met on the sidelines of the International Monetary Fund/World Bank meetings in Washington last month.
In Ottawa, Canadian Finance Minister Jim Flaherty played down any possibility of G20 nations agreeing to a coordinated action plan on foreign exchange issues at their meeting in Cape Town, South Africa on Nov. 17-18.
He ruled out any intervention in foreign exchange markets or other concerted measures to stabilise currencies.
“Realistically, I don’t expect any concrete unified action, I think that would be an unrealistic expectation,” Flaherty told Reuters.
“What we could hope for is an increased sense of urgency with respect to addressing issues related to global imbalances.” He said recent volatility in major world currencies could heighten the motivation at the G20 meeting, adding to pressure for all members to adopt market-based currencies.
“We’ve been talking for a couple of years almost about (how) at some point we would run into this type of turbulence unless the issue was addressed and now we’re in the time of turbulence.” The dollar’s lows against currencies of its major trading partners should reduce the large US trade deficit but it will harm countries that rely heavily on selling goods to the US, including Europe and Asia.
—Reuters