The Group of Seven industrialized countries called for more flexible exchange rates, boosting US treasury secretary, John Snow’s, campaign to persuade China to loosen its currency peg and Japan to reduce sales of the yen
Published:
22 September 2003 y., Monday
“We reaffirm that exchange rates should reflect economic fundamentals,” a statement from G7 finance ministers and central bankers meeting in Dubai said. “We emphasize that more flexibility in exchange rates is desirable for major countries or economic areas.”
The statement stops short of singling out any nation. China, the world’s sixth-largest economy, has pegged the yuan at 8.3 to the dollar since 1995, helping its economy to grow an average annual rate of 8.3 percent over the past decade. Japan, South Korea, Thailand, Indonesia and Taiwan have this year all sold their currencies to stem gains that would hurt exports.
Snow and US President George W. Bush, who is seeking reelection next year, are under pressure from lobbyists and unions representing American companies such as General Electric Co. and Nucor Corp. They blame the yuan peg for job losses and a record trade deficit with China because of the price advantage it gives Chinese exporters.
Japan sold an unprecedented 9.03-trillion yen ($76.8 billion) from January through July in an effort to weaken its currency and boost exports. The yen rose (on September 19) to 113.99 a dollar in New York trading, the highest since January. 4, 2001.
Analysts said Japan’s agreement to the statement showed it may be preparing to scale back yen sales.
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