MOSCOW (AP) — Finance ministers and central bankers from the world's 20 leading industrial and developing countries pledged not to weaken their currencies to gain an advantage in trade in an attempt to calm growing fears that governments are using foreign exchange as an economic weapon.
The two-day meeting in Moscow ended Saturday with a joint communique that included a promise that the G20 members would "refrain from competitive devaluation" and "resist all forms of protectionism and keep our markets open."
There has been widespread unease among investors and politicians over recent developments affecting the Japanese yen, which now trades near a three-year low. Japan is facing charges that it is trying first and foremost to lower the value of the yen to stimulate its economy and get the edge over other countries.
If too many countries try to weaken their currencies for economic gain — sparking a so-called "currency war" — the fragile global recovery could be derailed.
"We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic and financial stability," the statement added, without singling out Japan for criticism.
Speaking at a news conference following the communique's signing, Russian Finance Minister Anton Siluanov said that all the G20 nations agreed that they need to focus on delivering a strong economic growth rather than "manipulating the markets."
IMF's chief Christine Lagarde Saturday dismissed concerns of a looming currency war, saying that they witness "currency worries, not currency wars."
A U.S. senior administration official who spoke on condition of anonymity because she was not allowed to comment publicly said that the group discussed the importance of avoiding loose talk concerning exchange rates — although this point did not make it into the communique.
The G20 communique carries the same message as a statement earlier this week from the Group of 7 leading economies — France, the U.S., the U.K., Germany, Italy, Japan and Canada. In it the group warned that "excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability."
Several developing economies have recently criticized the U.S. program of quantitative easing for pushing up the value of their currencies. By buying up bonds, the U.S. Federal Reserve has also increased the amount of money in circulation. This has had the side-effect of driving down the value of that currency relative to others.
Fed Chairman Ben Bernanke defended the policy in a speech at a meeting of G20 financial chiefs with President Vladimir Putin on Friday.
"Consistent with the Group of 7 statement, the United States is using domestic policy tools to advance domestic objectives and we believe that by strengthening the U.S. economy, we're helping to strengthen the global economy as well," he said.
Sung Won Sohn, an economics professor at the Martin Smith School of Business at California State University, said it should come as no surprise that no country was singled out for criticism for movements in its currency.
"Many countries including China, Japan and the United States all have issues related to exchange rates," he said. "People in glass houses should not throw stones."
The Moscow meeting also ended with a pledge to crack down on tax avoidance by multinational companies. Google, Amazon and Starbucks have recently come under criticism from countries including France, the U.K. and Germany for shifting profits generated in one country to another to pay less tax.
In their communique, the G20 finance ministers said they were determined to take "necessary collective actions" to stop the practice.
The G20 ministers also decided to defer setting any new debt-cutting targets for its members. G20 members at a 2010 summit in Toronto committed to halve budget deficits by this year and it is now looking likely that some countries will fail on that commitment.
The U.S. senior administration official said Saturday that G20 members decided not to sign up to any new tangible goals or targets in Saturday's communique as they were anxious to depart from a "one-size-fits-all" approach.
Victoria Buravchenko in Moscow and Martin Crutsinger in Washington D.C. contributed to this report.