G7 fears sudden slide in main currencies By Krishna Guha and Chris Giles in Washington
Published: April 13 2008 15:31 | Last updated: April 13 2008 18:52
The Group of Seven industrialised nations has signalled shared concern over the danger of a disorderly slide in the dollar and sterling, following bouts of extreme weakness in the two currencies in recent months.
The warning came in a new sentence of the G7 communiqué, which said “there have been at times sharp movements in major currencies, and we are concerned about their possible implications for economic and financial stability”.
This is the biggest shift in the G7 language on currencies since the Boca Raton summit in February 2004. It signals the emergence of a new consensus on the risks posed by extreme currency weakness following months of disagreement between economies with appreciating and depreciating currencies.
Up to this point the US had rebuffed pressure from the eurozone to express concern about currency movements. The US government and the Federal Reserve see currency weakness as an essential prop to growth.
But the US government has started to worry more that dollar weakness could run out of control, exacerbating problems in financial markets. The Fed is concerned about the interaction of a weak dollar, global commodity prices and inflation expectations at home. ......(more)
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