GYEONGJU, South Korea – US Treasury Secretary Timothy Geithner yesterday said major world currencies were “roughly in alignment” and called on Group of 20 finance leaders to agree to “norms” on exchange rate policy.
Laying out his agenda for this weekend’s G20 meetings in South Korea, Geithner said in a Wall Street Journal interview he would seek numerical targets for “sustainable” trade surpluses and deficits as a way to help rebalance the global economy.He is hoping that by persuading major emerging and advanced economies to cooperate on foreign exchange policies, he can coax China into allowing the value of its yuan to rise further.”Right now, there is no established sense of what’s fair,” Geithner told the Journal.”We would like countries to move toward a set of norms on exchange rate policy,” he added.Geithner also sought to provide some reassurances that the United States is not deliberately trying to devalue its dollar.The Journal said that in the interview he suggested that he saw little reason for the dollar to sink further against the euro and the yen, saying that these “major currencies” were “roughly in alignment now”.Geithner on Monday in California vowed that the United States would not engage in dollar devaluation, saying “no country around the world can devalue its way to prosperity”.CURRENCY TAKES CENTRE STAGEWhile past G20 meetings avoided direct confrontation on thorny exchange rate issues, the meetings starting today in Gyeongju are expected to address the problem head-on. The dollar’s protracted slide and China’s tightly controlled trading band for the yuan have put upward pressure on other emerging market currencies that are allowed to move more freely.Actions by several countries, including Brazil this week, to stem the rise of their currencies and protect their exporters, has fuelled talk of a “currency war”.While some criticism has been levelled at US Federal Reserve monetary easing for weakening the dollar, US officials point to China’s determination to prevent its yuan from rising as the main source of tensions.Geithner repeated his view that China’s yuan is significantly undervalued, but if the pace of appreciation since September were sustained, it would correct the undervaluation over time.”If China knew that if it moved more rapidly, other emerging markets would move with them, it would be easier for them to move,” Geithner said.One key form of agreement that the United States is promoting are specific targets on current account balances. This would build on commitments made by the G20 in Pittsburgh, Pennsylvania, last year to help rebalance growth away from exports in fast-growing countries and to boost savings in advanced import-consuming economies.”We are exploring whether we can agree to commit to keep the external imbalances to levels that are more sustainable, making allowances for different kinds of countries, such as commodity producers,” Geithner told the Journal. – Nampa-Reuters
