(Reuters) – The United States urged a meeting of the Group of 20 leading economies not to resort to currency devaluations to boost exports, while a draft communique gave a gloomy assessment on Tuesday of the outlook for global growth.
The meeting of finance ministers and central bankers in Istanbul comes at a difficult time, with major economies running at different speeds, monetary policies diverging and Greece casting a new shadow over Europe.
U.S. Treasury Secretary Jack Lew underlined the need to stick to existing commitments on exchange rate policy, a Treasury official said, pledges which include refraining from competitive exchange rate devaluations.
“Secretary Lew strongly emphasized … that we are highly focused on ensuring that U.S. workers and firms play on a level playing field and no country should use their exchange rate to increase exports,” the official said.
The U.S. Federal Reserve looks set to raise interest rates this year, a stark contrast to huge money printing programs by the European Central Bank and Bank of Japan and impromptu rate cuts from India to Australia, Canada to Denmark.
A by-product of that is the dollar being driven higher while other major currencies tumble. There has generally been an acceptance in Washington that a weaker euro and yen is an inevitable consequence of actions to revive moribund economies, something the United States has consistently called for.
According to a draft communique for the meeting, obtained by Reuters overnight and intended for adoption later on Tuesday, the G20 welcomed the ECB’s quantitative easing – despite German concern – and said it would further support recovery in the euro area.
In a nod to expectations that the Fed will raise interest rates, the draft said some advanced economies with stronger growth prospects were moving closer to “policy normalization”.
But it cautioned: “In an environment of divergent monetary policy settings and rising financial market volatility, policy settings should be carefully calibrated and clearly communicated to minimize negative spillovers.”