Currency wars set to expand despite G20

Tim Wallace
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THE WORLD’S biggest economies will be able to continue manipulating exchange rates despite reassurances from the G20 leaders it will not happen, analysts warned over the weekend.

Although the communiqué from the G20 ruled out the deliberate weakening of currency values, it is still deemed acceptable as long as the change in exchange rates is a side-product of other policies.

“We will refrain from competitive devaluation. We will not target our exchange rates for competitive purposes, will resist all forms of protectionism and keep our markets open,” read the note. “We reiterate that excess volatility of financial flows and disorderly movements in exchange rates have adverse implications for economic stability.”

But analysts were more sceptical of the statement’s value.

“While almost all ministers tried to play-down currency tensions over the weekend, the fact remains that too many countries desire a weaker currency,” said Credit Agricole’s Adam Myers.

Meanwhile the UK, French and German governments used the meeting to launch a joint initiative to crack down on tax avoidance by multinational companies, which they will present to a G20 finance leaders meeting in July.