BLBG:G-20 Head Russia Pushes for Currency Manipulation Stance
Russia wants to head off a global currency war by pushing policy makers to make stronger commitments against exchange-rate manipulation as Group of 20 officials search for common ground in Moscow this week.
The G-20 should have more “specific” language opposing exchange-rate interference in the communique that will be issued after the two-day talks among finance chiefs that end Feb. 16, Russian Finance Minister Anton Siluanov said yesterday. Russia holds the G-20’s rotating presidency this year.
“The G-20 countries have always held the position that currency policy should be based on market conditions,” Siluanov said in an interview yesterday with Bloomberg Television. “I think we should take a more specific stance on this.”
The group, which says it represents 90 percent of the global economy, meets amid a threat of a so-called international currency war as countries push for weaker exchange rates to make their exports more competitive and Japan pushes for monetary stimulus. The yen has tumbled about 14 percent in the past three months against the dollar, raising concerns about the intentions of Japanese policy makers.
The Bloomberg-JPMorgan Asia Dollar Index headed for the first weekly advance in a month, with South Korea’s won leading gains in Asian currencies amid speculation the region’s policy makers will refrain from reining in exchange rates as the yen rebounded. The Japanese currency gained 0.3 percent to 92.58 per dollar as of 3:18 p.m. in Tokyo, extending its advance since Feb. 11 to 1.8 percent.
‘Policy Spillover’
In a draft of the G-20 communique obtained by Bloomberg News yesterday, the officials reaffirmed a pledge to “refrain from competitive devaluation” that was little changed from the last statement released by the group following a meeting in Mexico City on Nov. 5. They also pledged to commit to monitoring “possible monetary-policy spillover.”
“We reaffirm our commitment to achieve a lasting reduction in global imbalances through our joint actions to avoid persistent exchange-rate misalignment, refrain from competitive devaluation, resist protectionism in all forms and keep markets open,” the group said in the draft, which is dated Feb. 11.
The draft predates by one day a Feb. 12 statement by Group of Seven officials that commits the major industrial countries to not use domestic policies to target exchange rates. That was the G-7’s first statement on exchange rates since September 2011.
‘Specific Measures’
“Sharp moves in exchange rates of any country should be predictable, and actually shouldn’t happen at all,” Siluanov said yesterday. “We need to speak out more precisely about this issue and perhaps move from general phrases to more specific measures.”
Financial markets whipsawed this week amid mixed interpretations of what the G-7 meant in its statement, which avoided directly criticizing Japan.
Investors initially viewed the statement as accepting a declining yen, only for officials to then split over whether Japan was being singled out. The confusion surrounding the G-7 stance on the yen’s decline makes it unlikely the larger G-20 group can agree on effective action, according to Daragh Maher, a currency strategist at HSBC Holdings Plc in London.
‘Overblown’ Talk
The International Monetary Fund sought to ease concerns about exchange-rate volatility yesterday, calling talk of international currency wars “overblown.” The G-20’s final communique won’t include a separate statement about Japan or highlight the phrase “currency war,” Russian Deputy Finance Minister Sergei Storchak told reporters in Moscow today.
“We are all in the same boat,” Storchak said. “That’s why people understand that at some point abrupt decisions must be taken because of unemployment, social problems.”
The debate over currency manipulation this week may provide some indication about how much tolerance there is for a weaker yen, and whether other G-20 countries can even do anything about it.
New Japanese Prime Minister Shinzo Abe’s government denies driving a devaluation, saying its two-month effort to revive the economy through looser monetary policy is aimed at ending deflation.
The yen’s 55 percent surge over the five years through 2011 hammered Japan’s exporters, and helped spur the Liberal Democratic Party to adopt monetary stimulus as a campaign issue during the election that ushered it back to office in December.
Aso’s Rejection
Finance Minister Taro Aso on Dec. 28 rejected trading partners’ right to criticize Japan’s currency policies. He said that the U.S. should have a stronger dollar and questioned whether major G-20 nations had stuck to pledges from 2009 to avoid competitive devaluations. During his election campaign, Abe said foreign-bond purchases were a possible monetary tool.
G-20 nations will press Japan to clarify its policy toward exchange-rate movements, said the Russian finance minister.
“We have to get to the bottom of this of course, listen to our Japanese colleagues and how they explain this and what decisions they will take and what exchange-rate policy they will follow,” Siluanov said.
One issue that will be addressed in Moscow is how foreign bond purchases can influence exchange rates, Siluanov said. Another issue, cited in the draft communique, is a discussion about the spillover effects of monetary policy between countries.
Monetary Stimulus
Monetary-policy easing in advanced countries has drawn complaints from officials in emerging and export-driven nations, led by Brazilian Finance Minister Guido Mantega’s claim they are leading the global economy into a “currency war.”
The Feb. 11 draft says the G-20 is “mindful” there could be spillovers of monetary policy between countries and will continue to monitor their impact.
“Monetary policy should be directed toward domestic price stability, while continuing to support economic recovery,” according to the draft.
Seeking to improve the long-term potential of their economies, the G-20 members identified access to financing for investment as key for growth and hiring, the draft said. It will review steps governments and regulators can take to increase incentives to invest in areas such as infrastructure, the draft said.
To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Theophilos Argitis in Moscow at targitis@bloomberg.net; Raymond Colitt in Moscow at rcolitt@bloomberg.net
To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net
