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Finance chiefs to call for stable dollar

World finance chiefs will call for the stabilisation of the dollar whose slump some view as a threat to global recovery, sources have said.

Last Modified: 07 Feb 2004 22:33 GMT
US Treasury Secretary John Snow and Japan's Sadakazu Tanigaki

World finance chiefs will call for the stabilisation of the dollar whose slump some view as a threat to global recovery, sources have said.

British Chancellor of the Exchequer Gordon Brown said on Saturday that the Group of Seven Finance ministers have reached an accord on the thorny issue of a statement about the dollar from the leading industrialised economies.

"There has been a positive and constructive discussion which led to an agreement among all the members present," Brown said, without elaborating.

But European sources close the talks said the finance ministers have agreed to call for a halt to the dollar's precipitous slump, especially against the euro.

One source said a final statement issued at the Florida meeting would make explicit mention of a G7 appeal for "the avoidance of excessive volatility" on foreign exchange markets.

'Flexibility'

However, the statement was also expected to keep the mention of "flexibility", seen as a message to Asian nations to avoid massive intervention to keep their currencies artifically low.

"I insisted (that) if we see speculative moves, each country should be determined to do what is necessary to regain stability."

Japanese Finance Minister Sadakazu Tanigaki referring to a meeting with US Treasury Secretary John Snow

Finance ministers and central bank heads from Britain, Canada, France, Germany, Italy, Japan and the United States had been in a contentious debate over the language of the final statement.

While eurozone authorities had been seeking language aimed at restoring the dollar's lustre, they had encountered resistance from the United States, for which a weaker dollar spurs exports and economic growth.

European and Japanese authorities maintain that a recent pickup in global momentum could be jeopardized by imbalances in the world economy.

They point in particular to huge budget and current account deficits in the United States that weaken the dollar, as investors shun the greenback, and hamper growth efforts elsewhere.

Japanese intervention

Japanese Finance Minister Sadakazu Tanigaki said he told US Treasury Secretary John Snow that Tokyo remains prepared to intervene in currency markets to support Japan's export-led recovery.

"I insisted (that) if we see speculative moves, each country should be determined to do what is necessary to regain stability," the Japanese official said.

Eurozone officials had suggested that the Bush administration, by steadfastly refusing to stem the dollar's slide, is in effect trying to export its way back to economic health.

Snow said earlier he saw the issue as one of growth rather than market intervention.

"The focus of the conference, from my point of view, will continue to be growth and what we as ministers can do to build support for a higher growth in our domestic economy of our country and the economies of the world," he said.

"The focus of the conference, from my point of view, will continue to be growth and what we as ministers can do to build support for a higher growth in our domestic economy of our country and the economies of the world"

US Treasury Secretary John Snow

The Euro

"We have had a growth gap, a growth deficit, for some time," he added.

European authorities have recently managed to "talk down" the euro a bit. The single European currency has been hovering around $1.25 after hitting a high of $1.2898 in early January.

As the talks got underway on Friday, the euro surged past $1.27.

While they may have been at odds on some key issues, Europe and the United States agreed that Asian currencies, notably the yen and the yuan, should be allowed to appreciate freely, unfettered by central bank intervention.

China has so far resisted Bush administration pressure to abandon its dollar-yuan peg, which Washington says unfairly undervalues the Chinese currency.

Source:
Agencies
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