G20 renews FX mantra, China says yuan band move possible

By Tamora Vidaillet and Gordon Bell

CAPE TOWN, South Africa (Reuters) - China's central bank chief said on Sunday it could consider a wider trading band for the yuan currency after finance chiefs from the Group of 20 economic powers renewed calls for greater currency flexibility.

"Actually I think now it is quite OK for the floating band, but if it is necessary we can consider to expand that," Zhou Xiaochuan told reporters, stressing that any yuan CNY=CFXS move would depend on prevailing global economic conditions.

Finance chiefs from the Group of 20 economic powers said too much volatility and erratic currency movements were unwelcome and put a firm focus on the need to correct global economic imbalances in the face of rising risks to growth and inflation.

"Monetary authorities in G20 countries will need to assess carefully the inflation outlook in light of both tight conditions in commodity markets and the downside risks to growth," a communique issued at the end of the G20 meeting said.

"We also agreed that an orderly unwinding of global imbalances, while sustaining global growth, is a shared responsibility," it added.

The document stopped short of labeling specific currencies or economies as problematic.

French economy minister Christine Lagarde told reporters earlier the G20 did not want too much volatility or erratic movement, but that talks laid blame on no specific currency.

"We all concurred that the currency situation is one that needs a joint approach, concerted approach. Clearly we don't want to point the finger at anyone and we want to operate by consensus," Lagarde told reporters.

INFLATION, GROWTH RISKS RISE

The G20 meetings were held against a backdrop of a sinking U.S. dollar, a painful credit crunch and soaring oil prices.

The dollar's fall to record lows against a basket of currencies .DXY as credit conditions have deteriorated in global financial markets since August has been a factor driving up the price of key commodities, particularly oil CLc1, fuelling inflation and putting world economic growth at risk.

"There are concerns and concerns in the first place are about very significant changes in energy and food prices. That is having a profound impact (on inflation)," South African Finance Minister, Trevor Manuel told a news conference.

"We can emerge from this meeting having discussed issues and are fully certain that the global economy is going to continue to grow. We had a very deep and challenging discussion on commodity prices, but what we didn't do is beat up oil producers," he added.

Dominique Strauss-Kahn, Managing Director of the International Monetary Fund, said the fall in the dollar was a move in the right direction, but the euro EUR= and Canadian dollar CAD= were overly feeling the brunt of the adjustment.

"The view of the IMF is that the move in the dollar depreciation is in the correct direction," he told reporters.