FACTBOX - What was said on FX at Washington G7
WASHINGTON (Reuters) - The G7 communiqu released in Washington repeated a call for exchange rates to reflect economic fundamentals and cited China again by name, using the exact same wording as a statement issued after a meeting in Essen, Germany, in February.
In post-G7 news conferences, French Finance Minister Thierry Breton went further than others when commenting on the basic G7 message, but the collective G7 line remained that markets should take account of more balanced global growth, with U.S. activity easing, Europe going strong and Japan's recovery continuing.
Below is a compendium of what was said, following by details from the February meeting in Essen and recent foreign exchange movements:
G7 COMMUNIQUE, APRIL 13, WASHINGTON:
For a full text, please click on ID:nN13244665
"We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely, and cooperate as appropriate. In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur."
Also, the communiqu stated that global economic growth was becoming more even-keeled and said:
"We remain confident that the implications of these developments will be recognized by market participants and will be incorporated in their assessments of risks."
U.S. TREASURY SECRETARY HENRY PAULSON:
On yuan
"China is a very major economy in terms of trade in goods and services, but their capital markets and their currency are not yet integrated to the global economy."
"And so our approach has been to push for more flexibility, more -- frankly -- appreciation of the renminbi in the short term, and then in the intermediate term to make the case for China taking the steps that will allow it to have a truly market-determined currency."
"It is crucial China move now with greater urgency."
On yen
Asked about the yen, Paulson declined to reply specifically, but said Japan's Finance Minister Koji Omi and Bank of Japan Governor Toshihiko Fukui "were quite confident that Japan's economy was on a sustainable path of recovery" and that that was no different from the case when the G7 met in February.
SENIOR JAPANESE FINANCE MINISTRY OFFICIAL:
"Currencies should reflect economic fundamentals, and if it is reflecting Japanese economic conditions, I see no reason for the yen to weaken." He also said the yen rate did not hinge only on the Japanese economy, but reflected other factors as well.
JAPANESE FINANCE MINISTER KOJI OMI:
Omi said there was no specific discussion on the Japanese currency or the euro at the G7 meeting.
"I will not comment on currency levels. I have looked at movements since the Essen meeting (in February) and the euro has strengthened against the yen while the yen has risen against the dollar."
"I think it is the correct understanding that it is more to do with the strength in the euro."
BANK OF JAPAN GOVERNOR TOSHIHIKO FUKUI:
He said he told his G7 colleagues the central bank would raise interest rates gradually.
FRENCH FINANCE MINISTER THIERRY BRETON:
Breton was the only G7 finance minister who said publicly that U.S. Treasury Secretary Henry Paulson had reiterated to his G7 colleagues that Washington backed a strong dollar.
"The Essen language on exchange rates has not changed, but I'll give you a few insights into our discussion which will help you understand the paragraph in the current context."
"Firstly, global economic imbalances have started to be reabsorbed and it's the result of internal policies and structural reforms much more than exchange rates that have driven this."
"Second message: We had quite a long presentation from (U.S. Federal Reserve Chairman) Ben Bernanke and from my counterpart Hank Paulson -- and both of them had very reassuring messages in the American situation."
"The U.S. economy remains healthy and I was, by the way, happy to hear Hank Paulson restate his conviction that a strong dollar was in the U.S. interest."
"Third message: The Japanese economy is picking up strongly and again I was pleased to hear my Japanese colleague express his confidence in the Japanese recovery, and that this would be perceived -- this was his firm conviction -- increasingly."
"Fourth message: We once again warned markets against the idea that certain exchange rates could go only one way, which leads to bubbles on the currency markets."
"You'll remember in Essen, at Europe's behest moreover, we issued this message. The shakeout in markets in February showed the situation remained fragile and we were right in Essen to draw our (G7) colleagues' attention to this problem."
"Exchange rates are set by markets but markets can sometimes go too far. The euro is strong. That's irrefutable."
"It's indispensable, at its current level, to remind people of the Eurogroup's message ... more than ever, given the current climate, vigilance on the currency markets seems necessary."
ECB PRESIDENT JEAN-CLAUDE TRICHET
"As regards the yen, we had listened to our partners, the minister of finance and the central bank governor, and they said ... the fundamentals were very encouraging in Japan and this would be reflected, should be reflected, in the exchange market."
"It was important to hear the ministers and the central bankers (say) ... that the Japanese economy is on a consistent recovery path and exchange rates should reflect that."
Trichet also said in Washington ahead of the G7 meeting that the February G7 in Essen had sent a clear message, in the name of all, to emerging Asian nations to let their currencies rise.
"We had a clear-cut message, the members of G7, all together, all of them ... (that) suggests that the currencies of the emerging nations in Asia would appreciate progressively. That is absolutely clear," he said.
GERMAN DEPUTY FINANCE MINISTER THOMAS MIROW
Stuck to repeating the text of the communiqu and told journalists the message was the same as in Essen.
