The Group of Seven nations are considering saying they won’t target exchange rates when setting policy as they try to calm concern the world is on the brink of a currency war, two officials from G-7 countries said.
Finance officials from the world’s key industrial economies have drafted a statement on currencies now being reviewed by senior policy makers, they said on condition of anonymity. The current wording, which still may be changed, combines the traditional backing for market-set exchange rates with a new line that governments don’t direct fiscal or monetary policy at driving currencies, one aide said.
Japanese Prime Minister Shinzo Abe’s push for more aggressive monetary policy has raised concern abroad that his government is directly seeking to weaken the yen, something it denies. In the talks, Japan has questioned the statement’s contents -- which would mark a strengthening in rhetoric from the G-7’s last joint comment in 2011 -- as it doesn’t want to be singled out for criticism, another official from a G-7 nation said, also on the basis they not be named.
Even if the new language makes it into the final statement, Japan will still be able to maintain policies which result in a weaker yen, said Steven Englander, head of Group of 10 currency strategy at Citigroup Inc. The currency fell toward its weakest since May 2010 versus the dollar today as Japanese officials signalled their commitment to the current strategy.
“It seems very likely that a modest shift in language and no shift in intended policies will enable Japan to do all it wants to do, including weaken the yen,” New York-based Englander said in a report to clients.
The G-7 is looking to release the statement before a Feb. 15-16 meeting in Moscow of finance ministers and central bankers from the Group of 20, which includes the G-7 and emerging markets such as Brazil, China and India.
The Wall Street Journal reported yesterday that the G-7 was debating a statement.
French Finance Minister Pierre Moscovici called today for a coordinated approach to stabilizing exchange rates, denouncing the “aggressive” currency-management policies of some countries.
“Exchange rates can’t be subject to moods or speculation,” Moscovici told reporters before a meeting of euro-area finance ministers in Brussels today. “I’m pleading for a coordinated approach at the international level which enables exchange-rate stability, and also that these exchange rates reflect the fundamentals of our economies.”