Sunday, November 21, 2004

BERLIN (AP) — The world’s top finance officials stopped well short of expressing serious concern about the plunging U.S. dollar at a meeting that ended yesterday, although they issued a call for “steps toward greater exchange-rate flexibility” in Asia’s emerging economies.

German officials who hosted the meeting of finance ministers and central bank governors from the Group of 20 countries had played down hopes of action even as the dollar slid last week to record lows against the euro — worrying European officials who fear their fragile, export-led recovery will be hurt.

The final statement said the group “underscored the importance of medium-term fiscal consolidation in the United States, continued structural reforms to boost growth in Europe and Japan, and, in emerging Asia, steps toward greater exchange-rate flexibility.”

Concern over the U.S. trade and budget deficits has been a major factor in the dollar’s fall, and U.S. Treasury Secretary John W. Snow said he stressed to his counterparts in Berlin that “the United States is dealing with its deficit.”

“I wanted them to understand that this administration is absolutely committed to fiscally responsible behavior,” he said.

Still, Mr. Snow would not discuss exchange rates, arguing that “they weren’t on the agenda.”

The euro went into the weekend just below its all-time high of $1.3074, but the meeting’s final statement made no mention of the dollar.

During a European trip in the past week, Mr. Snow has insisted that the United States retain a “strong dollar” policy, but said that only markets should determine its exchange rate. Economists say President Bush has little incentive to support the dollar because its fall helps U.S. exporters.

Against that background, few observers had expected the G-20 meeting to produce any serious hint of concerted action to stop its fall.

Economists say Asian countries’ habit of pegging their currencies to the U.S. dollar has helped push up the euro against the dollar. Because Asian currencies cannot rise against the plunging dollar, that leaves the euro to absorb the brunt of the dollar’s fall.

Washington also has pushed China to stop pegging its currency at a fixed rate to the greenback, which American manufacturers contend has resulted in a large competitive advantage for Chinese goods.

Chinese Finance Minister Jin Renqing made no comment on the issue yesterday. Still, his Canadian counterpart said Chinese officials had acknowledged other countries’ concerns at recent meetings.

“They’ve always been keen to make people understand how well they understand the concerns,” Ralph Goodale said. “And they usually end the conversations by saying that [exchange-rate liberalization] may happen more expeditiously than we may think.”

Mr. Goodale said there had been no mention of precise timing during his talks with the Chinese, adding that “they’ll have to undertake significant reforms of their banking sector” before fully freeing exchange rates.

German Finance Minister Hans Eichel said there was “a common position” based on the G-7 group of industrialized countries’ declaration in February that excessive exchange-rate volatility wasn’t good for growth.

“That’s a common conviction and that means everyone has something to do,” Mr. Eichel told reporters.

The G-20 includes the G-7 nations as well as leading developing countries such as China, India, Mexico and South Africa.

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