Japanese
and Euro zone finance ministers called for G7 finance leaders meeting next week
to seek a curb on excessive exchange-rate movements, amid growing concern over
the economic effects of a sliding dollar.
“It is
important for the G7 members to confirm their shared understanding that
excessive foreign exchange rate moves are undesirable for economic
growth,” Japanese Finance Minister Fukushiro Nukaga told reporters on
Friday, when asked whether the dollar’s broad downtrend would be discussed at
the G7 meeting.
The dollar
tumbled to an all-time low of 1.59 per euro and to a 13-year low below 96 yen
last month on fears the
economy, battered by an ailing housing market and a deeply wounded banking
sector, would enter a recession.
It has
bounced back somewhat to around 1.5655 to the euro and 102.35 against the yen
on Friday, but has still fallen nearly 6 percent on a trade-weighted basis in
the past month — raising fears in Europe and Japan that businesses will lose
out to cheaper rivals trading in U.S. dollars.
Ministers
from the 15 countries using the euro and the European Central Bank, or the
Eurogroup, are meeting in the town of
close to
regular meeting and agree on their call to Group of Seven rich economies, which
meet next Friday in
Nukaga said
the G7 finance ministers and central bankers needed to communicate closely to stabilize
financial markets at a time global economic growth appears to be slowing.
The G7 has
said in past meeting communiqués that excess volatility and disorderly
movements in exchange rates were undesirable.
Markets
watch communiqué wording on exchange rates closely, because all G7 members
agree on the phrasing, so it could give the first signal of a deal on concerted
action in foreign exchange markets.
European
countries have been vocal in expressing concern over the euro’s sharp rises
against the dollar as such moves would hurt the competitive advantage of the
region’s exports.
French
Economy Minister Christine Lagarde said on Thursday that the current situation
in the currency market was “painful” for euro zone economies.
exporters, with Sony Corp, the maker of PlayStation game machines, saying on
Thursday that each one yen rise against the U.S. dollar cost the company about
$59 million.
However,
big Japanese manufacturers have not complained much about the stronger yen and
monetary authorities in
a hands-off approach, partly because the nation’s exports have continued to
rise despite slowing
growth. With the yen having stabilized, few market players expect
some warn against complacency.
The world’s
central banks are also considering new measures to ease the pain in money
markets,
Jiji news wire reported on Friday, without citing sources.
The central
banks of
and some developing countries were considering a system to allow a private bank
in one country to borrow funds from another country’s central bank if it had
collateral set aside at the central bank in its own country, Jiji said.
