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Brainard Reiterates U.S. Stance Against Competitive Devaluations

Lael Brainard, the U.S. Treasury undersecretary for international affairs, reiterated the U.S. position that countries need to refrain from competitive devaluations and currencies should trade freely in most cases.

Group of 20 nations must “bring their exchange-rate frameworks into alignment so that we grow together and avoid a downward spiral of beggar-thy-neighbor policies,” Brainard said at a conference in Moscow, where she’s attending a meeting of G-20 finance ministers and central bankers.

Nations need to “avoid loose talk about currencies,” move toward “market-determined exchange rates” and refrain from “competitive devaluation,” Brainard said.

The G-20 finance chiefs will reaffirm a pledge to “refrain from competitive devaluation” and commit to monitoring “possible monetary-policy spillover,” according to a draft statement obtained by Bloomberg News yesterday.

The language on currencies is similar to the last statement released by G-20 officials Nov. 5, and predates by one day a Feb. 12 statement by Group of Seven officials that commits the major industrial countries to not use domestic policies to target exchange rates.

Brainard is attending the Moscow meetings while the U.S. Senate considers President Barack Obama’s nomination of Jack Lew as Treasury secretary. Former Treasury Secretary Timothy F. Geithner left office last month.

U.S. Priority

At his confirmation hearing Feb. 13, Lew said the U.S. works through the G-20 and G-7 “to advance the view that it’s not just the United States, but the organized nations of the world, that insist on having currency policies which are market-determined.” Lew also said he’d continue U.S. policy supporting a strong dollar.

The U.S. priority for the G-20 is to strengthen global economic demand, said Brainard, speaking at a conference held by the Institute of International Finance.

“It’s important to avoid jeopardizing the recovery with a premature shift to restraint,” she said.

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