G20 finance chiefs make exchange rate pledge

MOSCOW – Finance chiefs from the world’s 20 leading industrial and developing countries attempted Saturday to calm fears that governments are using foreign exchange as an economic weapon by pledging not to weaken their currencies to gain an advantage in global trade.

The two-day meeting in Moscow ended Saturday with a joint communiqué that included a promise that the G20 members would “refrain from competitive devaluation” and “resist all forms of protectionism and keep our markets open.”

There has recently been widespread unease among investors and politicians over developments affecting the Japanese yen, which now trades near a three-year low. Japan is facing charges that it is trying first and foremost to lower the value of the yen to stimulate its economy and get the edge over other countries.

If too many countries try to weaken their currencies for economic gain – sparking a so-called “currency war” – the fragile global recovery could be derailed.

“We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability,” the communiqué added – using the same language as a statement on the same subject made earlier this week by the Group of 7 leading economies.

Neither statement singled out any country – including Japan – for criticism.

Speaking at a news conference following the communiqué’s signing, Russian Finance Minister Anton Siluanov said that all the G20 nations agreed that they need to focus on delivering strong economic growth rather than “manipulating the markets.”

Several developing economies have recently criticized the U.S. program of quantitative easing for pushing up the value of their currencies. By buying up bonds, the U.S. Federal Reserve has also increased the amount of money in circulation. This has had the side effect of driving down the value of that currency relative to others.

Fed Chairman Ben Bernanke defended the policy in a speech at a meeting of G20 financial chiefs with President Vladimir Putin on Friday.

“Consistent with the Group of 7 statement, the United States is using domestic policy tools to advance domestic objectives and we believe that by strengthening the U.S. economy, we’re helping to strengthen the global economy as well,” he said.