World must recommit to market-based currencies: US official
Group of 20 member nations (G-20 meeting) must avoid beggar-thy-neighbor currency policies and the richest advanced economies need to stick to their long-standing rule to let market forces set their exchange rates, a senior US official said on Monday.
Treasury Undersecretary Lael Brainard, the top U.S. official for international economic affairs, said fiscal and monetary policies should be aimed at achieving domestic objectives, as opposed to targeting a weaker currency to bolster exports.
"The G20 needs to deliver on the commitment to move to market-determined exchange rates and refrain from competitive devaluation," she told reporters at a briefing outlining U.S. priorities for a G20 finance ministers meeting on Friday and Saturday in Moscow.
Free exchange rates also help support fair global growth, Brainard said, adding that the meeting needed to focus on ways to strengthen the fledgling global economic recovery and avoid an undue tightening of fiscal policy that could hurt growth.
"Global growth is weak and vulnerable to the downside. Strengthening global demand must be at the top of the G20" agenda, Brainard said. "We must avoid jeopardizing the recovery with a premature shift to restraint."
She added that Europe in particular could consider "recalibrating" the pace of its fiscal consolidation, as unemployment remains high and the euro area as a whole is stuck in recession.
In recent weeks, currency concerns have jumped to the top of the agenda for the Moscow meetings of the G20 group of advanced and emerging economies.
U.S. and European officials privately have been concerned about comments from Japanese officials that suggest Tokyo is targeting a specific level for the yen.
Japan's new government has pressed for aggressively expansionary monetary policies, which have prompted the Japanese currency to weaken sharply. The yen has lost 15 percent against the U.S. dollar since October, and last week hit a near three-year low against both the dollar and the euro.