G20 moves closer to agreement on currencies

A high-level meeting of the world's major economies is moving closer to an agreement on policies to reduce currency tensions that threaten the global recovery, a US official said today.

But any accord from the meeting of Group of 20 finance ministers and central bank governors in the South Korean city of Gyeongju is unlikely to include specific targets for reducing the vast trade surpluses that emerging nations, China particularly, have with the West.

A statement the group plans to issue later today is likely to include language saying that emerging nations should move toward market-oriented exchange rates and refrain from competitive devaluations of their currencies, a US administration official said on the sidelines of the final day of the two-day meeting.

The official also said that the statement was expected to call for advanced economies to be on guard against volatility and disorderliness in exchange rates.

Describing such steps as voluntary, the official said they would likely help emerging nations deal with the recent problem of large inflows of foreign money pushing their currencies higher and lead to more flexible exchange rates.

"What the commitments here do is acknowledge that persistent large imbalances - surpluses no less than deficits - are something we all need to work together to reduce," the official said.

"And they do so in a way that will bolster the adjustment of exchange rates and facilitate global adjustment."

The meeting of G20 finance mandarins comes just two weeks after their meeting in Washington failed to iron out currency differences that have led to fears of a trade war that could trigger another economic downturn.

In such a scenario, countries devalue their currencies to gain a competitive advantage in a world economy that has yet to fully recover from the global financial meltdown two years ago.

Trade barriers are erected in response, hitting international commerce and reversing the economic recovery.

The G20, which has been around since 1999 and includes both rich and emerging countries, assumed the role of global economic leader following the worldwide financial crisis.

The Group of Seven advanced nations faced criticism that it was too narrow a forum and failed to represent the voices of China and other fast-growing countries such as India.

The current meetings come ahead of a summit of G20 leaders set for November 11-12 in Seoul where countries are expected to consider recommendations for strengthening the global economy, including stricter capital requirements for banks and reform of the International Monetary Fund.