October 2, 2009
G7 set to issue FX statement, no breakthrough
* G7 expected to issue communique mentioning currencies
* But no change in language likely from April statement
* Europeans may be disappointed on issue of euro strength
* Unclear if China's yuan will be mentioned
ISTANBUL/GOTHENBURG, Oct 2 - The Group of Seven rich nations is expected to issue its customary call for stable exchange rates on Saturday, but do nothing more specific to address concern that a weak dollar could hurt European exports.
With the G7 increasingly eclipsed in global policymaking by the Group of 20 countries, which includes big developing economies such as China and India, there was debate among officials earlier this week over whether the G7 would issue any communique at all after its meeting in Istanbul on Saturday.
G7 sources said on Friday that a communique would be issued, partly because it was important to have a joint statement to avoid confusion and avert the risk of individual countries implying agreement on policies when there had been none.
"There will be a G7 communique," a French official, who declined to be named, said at a meeting of senior European officials in the Swedish city of Gothenburg.
But another G7 source said the communique's language on currencies was not expected to differ from the language used in April, when finance ministers and central bankers from the G7 last met.
"You should not be looking for any shift".
The April statement read, "Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability. We continue to monitor exchange markets closely, and cooperate as appropriate."
EURO
That bland language could disappoint European, particularly French officials who have expressed concern in recent days that the euro's EUR= strength against the dollar could damage Europe's economic recovery by stifling exports. The euro is up about 16 percent since March.
"It is out of the question that the euro pays the bill for an adjustment between the dollar and the (Chinese) yuan," French Economy Minister Christine Lagarde said on Thursday.
On Friday, she said she hoped the currency issue would be discussed in Istanbul.
The G7 meeting takes place as officials gather for a semiannual meeting of the International Monetary Fund, whose top officials have made it clear they think there is little room to accomodate European worries about euro strength.
"What we find today among the major traded currencies is that, in broad multilateral, effective terms, inflation-adjusted terms, for the major traded currencies there does not appear to be a problem in restoring and sustaining growth," First Deputy Managing Director John Lipsky told Reuters television on Friday.
U.S. Treasury Secretary Timothy Geithner on Thursday repeated that a strong dollar was very important to the United States -- a statement European officials had been pressing him to make.
But since U.S. officials have continued to make that statement even during periods of great dollar weakness, it is only of minor value in allaying fears of further euro strength.
CHINA
The G7 source said it was not clear how China would be mentioned in Saturday's G7 communique.
The G7's statement in April said, "We welcome China's continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi in effective terms and help promote more balanced growth in China and in the world economy."
However, pressuring China to appreciate its currency in this way may be ineffective because of China's key role in the increasingly powerful G20. China is not in the G7, which comprises the United States, Japan, Germany, France, Britain, Italy and Canada.
IMF chief Dominique Strauss-Kahn repeated on Friday that the IMF believed the Chinese yuan CNY=, which is closely controlled by Beijing, was undervalued.
news/ap
