THE G20 economies pledged to steer clear of an all-out currency war at the weekend, as countries including China and the USA agreed not to competitively devalue their currencies.
The G20 finance ministers, who met in South Korea ahead of a summit next month, said in a communiqué they will “move towards more market determined exchange rate systems”.
US Treasury secretary Tim Geithner said that China was committed to moving the yuan towards a market rate. “They’ve got a ways to go but I think they’re committed to do that, because they recognise it’s in their interest,” he told Bloomberg TV after the meeting.
The US is now unlikely to go ahead with its plan to impose punitive tax on Chinese exports, according to analysts last night. The House of Representatives passed a law last month to treat the yuan’s exchange rate as an illegal tariff.
The G20 said it will move to tackle international trade imbalances but stopped short of specific targets, despite a call from the United States to limit surpluses at four per cent of a country’s gross domestic product.
The ministers did make progress on overhauling the International Monetary Fund, by shifting power in favour of emerging nations.
Several analysts, including GFT’s Martin Slaney, predict a jump in European stock markets this morning in response to the G20 agreement.