G20 leaders agree to raise forex rate flexibility, refrain from currency devaluation
SEOUL. Nov 12 (Interfax) - The G20 leaders have decided to move toward more flexibility in foreign exchange rates, which would reflect underlying economic principles, and also agreed to refrain from the competitive devaluation of currencies.
These measures are set out in the plan of action adopted by the G20 leaders, according to the G20 Seoul summit communique.
The countries plan to adopt macroeconomic strategies, including by embarking on the path of budget consolidation so as to ensure continuous recovery and sustainable growth, and strengthen the stability of financial markets, in particular, by moving toward market-set foreign exchange rates.
Developed economies, including countries with reserve currencies, will be watching closely to prevent sharp fluctuations and chaotic variations of foreign currency exchange rates, the communique said. These actions will help reduce the risk of excessive capital flow volatility in developing economies.
When countries encounter the excessive burden of foreign exchange rate volatility, the response measures of developing countries, which have the necessary reserves and whose flexible foreign exchanges rates continue to rise, can include thoroughly developed macroprudential measures, the G20 said.
Although the international monetary and financial system proved stable, the factors of tension and vulnerability were obvious. We decided to explore ways of further improving the international monetary and financial system to ensure systematic stability of the global economy, the Seoul plan of action said.
The G20 leaders have agreed to take measures helping to reduce excessive imbalances and keep the current account imbalances at a stable level. However, just as the G20 finance ministers and central bank governors in Gyeongju, the G20 leaders failed to come up with concrete proposals to impose a cap on trade surpluses and deficits in certain countries.
The United States and South Korea earlier proposed a 4% cap
The finance ministers and central bankers will once again discuss issues and improved proposals at a meeting in spring 2011.