G7 promises to avoid currency wars
On 12 February, G7 (US, Britain, France, Germany, Japan, Canada and Italy) reaffirmed their commitment not to be drawn into global currency wars.
“We reaffirm that our fiscal and monetary policies have been and will remain oriented towards meeting our respective domestic objectives using domestic instruments, and that we will not target exchange rates,” the statement highlighted.
Japanese Finance Minister Taro Aso welcomed the statement, saying that the rest of the world powers recognised that Japan’s choice to double its inflation target, does not aim at affecting foreign exchange markets. “It was meaningful for us as (the G7) properly recognizes that steps we are taking to beat deflation are not aimed at influencing currency markets,” Aso told reporters.
US Treasury official Laei Brainard recognised Japan’s monetary policy as necessary but stressed that competitive devaluation should be avoided. Brainard comments, just few days before the G-20 in Moscow (15-16 February), most probably targeted China. On 28 November, the US Treasury Department announced that China isn’t characterised as a currency manipulator, although yuan “remains significantly undervalued.” William Reinsch, president of the National Foreign Trade Council told Bloomberg, “it appears that the strategy of the last two [US] administrations to use diplomacy rather than confrontation in dealing with the yuan’s value is having some positive results.”
Yesterday, the Head of Eurozone’s Finance Ministers Jeroen Dijsselbloem stressed the importance of G20, for euro’s exchange rate. Last week, France expressed its worries on the rising value of euro and yesterday French Finance Minister Pierre Moscovici announced his intention to negotiate the exchange rate issue with other eurozone members and with the G-20 countries. However, Germany replied that the euro is not overvalued.
Last week, ECB’s President Mario Draghi, stressed that the euro was not yet overvalued but the European Bank is monitoring the current strength of the currency.
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