G7 draft singles out yuan but not yen, pound

ROME (Reuters) - The Group of Seven industrialized nations reiterated a desire to see China's yuan gain in a draft statement on Friday but did not single out other currencies which have recently caused concern.

The group said only that it would monitor foreign exchange markets closely and take appropriate action, in language that was almost identical to the statement issued at their last meeting in October.

However, the tone on China was slightly softer than previously, in an effort to repair the damage from a spat with Washington over comments that Beijing was manipulating its exchange rate for economic gain.

"We welcome China's fiscal measures and continued commitment to move to a more flexible exchange rate, which should lead to continued appreciation of the Renminbi (yuan) in effective terms," the draft statement, due to be finalized on Saturday, said.

The Oct 11 statement said "we encourage the authorities to allow accelerated appreciation of the RMB effective exchange rate as a means of further rebalancing of the domestic economy and promoting external stability."

European officials have expressed concern about Japanese authorities repeated verbal interventions on the yen. They have also worried about the weakness of sterling, which makes it harder for exporters in the euro zone to compete with their British counterparts.

But in the run-up to the meeting policymakers said they wanted to avoid ruffling troubled markets with any currency surprises. They also noted that volatility in the yen and sterling had subsided in recent weeks.

"We see that volatility has increased...but taking into account the present levels of the different currencies we are now closer to normal values of thse currencies than we were a few months ago," European Economic Affairs Commissioner Joaquin Almunia told reporters earlier on Friday in Rome.

Nevertheless, the group, which comprises Britain, France, Germany, Italy, Canada, the United States and Japan, warned against any wild market swings.

"Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," the statement added. "We continue to monitor exchange rate markets closely, and cooperate as appropriate."

Britain's pound gained against the dollar on Friday, with dealers citing speculation that the group would express concern at the weakness of sterling.

Last month French Economy Minister Christine Lagarde urged the Bank of England to take action to help the weak pound. Her comments were shrugged off by British officials.

"Any discussions that we have at the G7 tend to be in general terms," British finance minister Alistair Darling said on Friday. "Britain has a policy of targeting inflation, not the exchange rate."

The yen also fell against the dollar on Friday, following months of gains as investors use it as a safe haven from collapsing western economies, hit by worries the Rome statement would hit out at its strength.

"We will not necessarily point a finger. We will talk about all exchange rates," Lagarde told reporters.

(Writing by Anna Willard; Editing by Patrick Graham)