* Need floating exchange rates to support growth: Brainard
* Brainard raises concerns about undue belt-tightening
* Yen falls after Brainard says supports Japan policies to
WASHINGTON, Feb 11 Group of 20 member nations
must avoid beggar-thy-neighbor currency policies and the richest
advanced economies need to stick to their long-standing rule to
let market forces set their exchange rates, a senior U.S.
official said on Monday.
Treasury Undersecretary Lael Brainard, the top U.S. official
for international economic affairs, said fiscal and monetary
policies should be aimed at achieving domestic objectives, as
opposed to targeting a weaker currency to bolster exports.
"The G20 needs to deliver on the commitment to move to
market-determined exchange rates and refrain from competitive
devaluation," she told reporters at a briefing outlining U.S.
priorities for a G20 finance ministers meeting on Friday and
Saturday in Moscow.
Free exchange rates also help support fair global growth,
Brainard said, adding that the meeting needed to focus on ways
to strengthen the fledgling global economic recovery and avoid
an undue tightening of fiscal policy that could hurt growth.
"Global growth is weak and vulnerable to the downside.
Strengthening global demand must be at the top of the G20"
agenda, Brainard said. "We must avoid jeopardizing the recovery
with a premature shift to restraint."
She added that Europe in particular could consider
"recalibrating" the pace of its fiscal consolidation, as
unemployment remains high and the euro area as a whole is stuck
In recent weeks, currency concerns have jumped to the top of
the agenda for the Moscow meetings of the G20 group of advanced
and emerging economies.
U.S. and European officials privately have been concerned
about comments from Japanese officials that suggest Tokyo is
targeting a specific level for the yen.
Japan's new government has pressed for aggressively
expansionary monetary policies, which have prompted the Japanese
currency to weaken sharply. The yen has lost 15 percent against
the U.S. dollar since October, and last week hit a near
three-year low against both the dollar and the euro.
The G7 is considering issuing a statement this week
reaffirming its commitment to "market-determined" exchange
rates, two G20 officials said earlier on Monday.
"For the market process to work, exchange rates must be
allowed to reflect market forces," Brainard said. "The G7 has
long committed that exchange rates should float, except in rare
circumstances where excess volatility or disorderly movements
might warrant cooperation."
Brainard declined to say whether the United States has
expressed its concerns to Japan in particular.
"We support the effort to reinvigorate growth and to end
(deflation) in Japan," she said. "And of course, we also know
Japan is an important member of the G7, and we'll continue to
work with Japan in the G7 to continue to adhere to our important
agreements in that forum."
Market participants interpreted her comments as suggesting
the United States would not officially criticize Japan's
currency policy, sending it even lower on Monday. The dollar
rose to its highest level since May 2010 versus the yen, and the
euro gained more than two percent against it.
Brainard will be attending the G20 meetings for the United
States. President Barack Obama's Treasury nominee, Jack Lew, has
not yet been confirmed by the Senate, and the acting secretary,
Neal Wolin, is not able to attend as he is running the agency.