| A draft statement said G20 finance ministers will pledge to 'refrain from competitive undervaluation' [AFP]
Finance ministers and central bank chiefs from the G20 nations have gathered in South Korea, but reports suggests that a global agreement to tackle economic imbalances and avert the prospect of damaging currency devaluations could evade them.
The G20, comprising 19 industrial and emerging-market countries and the European Union (EU), started formal meetings in the city of Gyeongju on Friday with nations from the developing world and Japan dismissing US proposals to set limits on current account balances.
The move is intended to defuse tensions over currencies that economists fear could trigger trade wars.
"We need to talk about it first, but numerical targets are unrealistic," Yoshihiko Noda, the Japanese finance minister, said.
Many emerging market policymakers are loath to allow their currencies to appreciate substantially and blame the US for financial mismanagement that led to the global financial crisis.
Policy makers have also accused the US of engaging in its own devaluation by flooding markets with liquidity from its quantitative easing policies, effectively printing dollars to increase the amount in circulation.
That has had the effect of pushing a wall of money into emerging markets like Brazil, forcing them to adopt a range of measures to stem capital flows which have boosted asset prices and complicated fiscal and monetary policy.
A draft statement quoted by Dow Jones Newswires, however, said the ministers will seek a temporary truce in the so-called currency wars and will pledge to "refrain from competitive undervaluation" of their currencies.
The G20 will "move towards [a] more market-determined exchange rate system", the draft said.
Yoon Jeung-Hyun, South Korea's finance minister, told reporters he was "optimistic" about the weekend meeting but did not elaborate.
And Yim Jong-Yong, the country's vice-finance minister, said separately that he believes agreement on forex disputes will be reached at some point.
"China is making its own efforts, for instance by raising interest rates," Yim said.
"They know this fight [on currency] will eventually damage both sides and lead to trade protectionism, so I believe that this issue will reach agreement."
'Lots of complaints'
The United States and European Union accuse China of keeping its yuan grossly undervalued to benefit exporters.
Beijing counters that Washington's loose monetary policy is swamping emerging markets with destabilising capital inflows, as investors chase higher yields than they can secure from the dollar.
Some delegates said meaningful agreements at the summit were unlikely, aside from a commitment to a development agenda for poorer nations that has been backed by South Korea and a framework for financial regulation.
"One thing is clear the final agreement on this framework agreement [on economic stability] will not be made at the finance ministers' meeting," Andrey Bokarev, a Russian finance official, said ahead of the meetings.
"There is an action plan, but there are an awful lot of complaints, proposals."
Failure to reach an global agreement has already been reflected in the financial markets, although any hardening of the tone of the final communique, due on Saturday, could bolster emerging market currencies at the expense of the dollar.