Russia Urges Stronger G-20 Stance on Currency Manipulation

The Group of 20 nations should take a stronger stance against currency manipulation at a meeting in Moscow, Russian Finance Minister Anton Siluanov said after conflicting statements on the weakening yen roiled markets.

Russia wants more “specific” language opposing exchange-rate interference in the communique that will be issued after talks among finance chiefs this week, Siluanov said in an interview today with Bloomberg Television’s Ryan Chilcote. Russia holds the G-20’s rotating presidency this year.

“The G-20 countries have always held the position that currency policy should be based on market conditions,” Siluanov said. “I think we should take a more specific stance on this.”

Russian central bank First Deputy Chairman Alexey Ulyukayev warned last month that the world was nearing the brink of a fresh “currency war” as countries weaken their currencies to make their exports more competitive. The yen has tumbled 17 percent in the past three months against the dollar. Financial markets whipsawed two days ago as the Group of Seven major industrialized countries issued a statement viewed by investors as accepting a declining yen, only for officials to then split over whether Japan was being singled out.

Yen Tolerance

The spotlight now falls on this weekend’s G-20 meeting in the Russian capital as investors question how much tolerance there is for a weaker yen.

G-20 finance chiefs in November called for member nations to refrain from competitive devaluations and move rapidly toward more market-based exchange rates. One issue that will be addressed in Moscow is how foreign bond purchases can influence exchange rates, Siluanov said.

“Sharp moves in exchange rates of any country should be predictable, and actually shouldn’t happen at all,” he said. “We need to speak out more precisely about this issue and perhaps move from general phrases to more specific measures.”

New Japanese Prime Minister Shinzo Abe’s government denies driving a devaluation, saying its two-month effort to revive the economy through looser monetary policy is aimed at ending deflation.

Japanese Stimulus

The yen’s 55 percent surge over the five years through 2011 hammered Japan’s exporters, and helped spur the Liberal Democratic Party to adopt monetary stimulus as a campaign issue during the election that ushered it back to office in December.

Finance Minister Taro Aso on Dec. 31 rejected trading partners’ right to criticize Japan’s currency policies. He said that the U.S. should have a stronger dollar and questioned whether major G-20 nations had stuck to pledges from 2009 to avoid competitive devaluations. During his election campaign, Abe said foreign-bond purchases were a possible monetary tool.

G-20 nations will press Japan to clarify its policy toward exchange-rate movements, said the Russian finance minister.

“We have to get to the bottom of this of course, listen to our Japanese colleagues and how they explain this and what decisions they will take and what exchange-rate policy they will follow,” Siluanov said.

Major G-20 economies have reached a consensus that market-determined exchange rates are an “important element of firm, stable and long-term growth” and that’s it’s not worth interfering with market forces, Ulyukayev told Bloomberg News today.

Broad Agreement

Still, the confusion surrounding the G-7 stance on the yen’s decline makes it unlikely the larger G-20 group can agree on effective action, according to Daragh Maher, a currency strategist at HSBC Holdings Plc in London.

“The G-7 ended with three different interpretations of a communique,” Maher said in a radio interview today on “Bloomberg the First Word” with Michael McKee. “What’s the likelihood we can get agreement from 20 people around a table?”

If Japan wants to see the yen sold against other G-7 currencies, “it will very likely happen,” Steven Englander, head of Group of 10 currency strategy at Citigroup Inc., said in an e-mailed research note yesterday.

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