World must recommit to market-based currencies: U.S. official

WASHINGTON (Reuters) - Group of 20 member nations must avoid beggar-thy-neighbor currency policies and the richest members need to stick to their long-standing rule to let market forces set their exchange rates, a senior U.S. 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.

She said the meeting needed to focus on ways to strengthen the still-vulnerable 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."

In recent weeks, currency concerns have jumped to the top of the agenda for the Moscow meetings of the G20 group of advance and emerging economies.

U.S. and European officials 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 yen to weaken sharply.

The G7 is considering issuing a statement this week reaffirming its commitment to "market-determined" exchange rates, two G20 officials said earlier on Monday.

"For the market process to work, exchange rates must be allowed to reflect market forces," Brainard said. "The G7 has long committed that exchange rates should float, except in rare circumstances where excess volatility or disorderly movements might warrant cooperation."

(Reporting by Anna Yukhananov; editing by Andrew Hay)

Source: http://news.yahoo.com/g7-committed-market-exchange-rates-u-official-203334324--business.html

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