G-20 to Avoid ‘Competitive Devaluation’ of Currencies
By Simon Kennedy and Shamim Adam
Oct 25, 2010
Group of 20 finance chiefs vowed to avoid weakening currencies to lift exports and left it to a leaders’ meeting next month to flesh out how to further pressure member China to allow faster gains in the yuan.
Finance ministers and central bankers ended talks in South Korea Oct. 23 foreswearing “competitive devaluation” to calm fears of a trade war stemming from using cheaper currencies to spur growth. They called for reduced trade imbalances while stopping short of a U.S. proposal for targets that was aimed at making a yuan advance more palatable to China. Leaders will take up the debate at the Seoul summit on Nov. 11-12.
The decisions taken in Gyeongju are unlikely to mark an end to the dollar’s recent slide or trigger a quicker rise in the yuan, according to strategists at banks from UBS AG to Westpac Banking Corp. Investors may now look for direction from the Federal Reserve’s meeting next week to decide whether to buy more assets, a step that may undermine the dollar.