LONDON With economic policy stimuli already at full tilt, no government wants an overvalued exchange rate to slay recovery, and the rival "soft currency" needs are producing some elaborate rhetorical jousting.
The problem is that major exchange rates -- at least those between the developed G4 economies of the United States, euro zone, Japan and Britain -- are largely market determined and difficult to control.
There's no magic wand to conjure up devaluation and the monetary and fiscal levers that could possibly engineer a free-floating depreciation are near exhausted.
G4 interest rates remain near zero. New money and liquidity taps have been switched to gushing. And soaring government debts show how much has been spent on fiscal boosts or bank bailouts.
With these orthodox policy switches close to maximum power, keeping currencies competitive in the scramble for scarce export markets is the next trick and a more subtle approach is needed.
Short of direct open-market intervention -- already being conducted by the Swiss and considered by Japan -- all that's left to policymakers is nuancing of speeches and market suasion.
But nudging markets can be a dangerous game, not least because there's a risk of panicking foreign creditors at a time of ballooning national debts.
And so the "race to the bottom" is more like a sideways shimmy.
TALKING THE TALK
The verbal record suggests that, at the very least, none of the main protagonists want rising currency rates -- a factor that may influence the timing of their policy exit strategies.
U.S. officials say publicly they are not relying on a low dollar to meet President Barack Obama's ambitious pledge to double exports over the next five years but few economists believe this is consistent with an appreciating greenback.
At the same time, Treasury Secretary Tim Geithner, self-confessed author in 1990s of the now questionable "strong dollar" policy, still travels the world assuring investors his government is not seeking to devalue its way out of its debts.
Euro zone governments were publicly fearful of the euro's steep climb against the dollar over the past 12 months but have been handed a silver lining to the Greek debt saga in the form of a near 10 percent euro retreat as the crisis intensified.
French finance minister Christine Lagarde played on the U.S. rhetoric: "We have always said we want a strong dollar," she said.
Bank of England officials regularly extol the virtues of a weaker pound. "We need an increase in net exports and the fall in sterling that we have seen since the middle of 2007 is part of that adjustment process," governor Mervyn King said just last month.
The UK Treasury, wary of the pound's impact on an intensive gilt sale program and its vulnerability with an election coming, is more circumspect. Finance minister Alastair Darling prefers to play down its fall as a product of "febrile" markets.
Japan, still battling consumer price deflation that has boosted its real interest rates and the yen, is the one of the four that looks like it could go beyond just talk. Last week it raised its borrowing limits for currency market intervention for the first time in six years.
So how have the Big Four currencies been doing?
Based on trade-weighted performance since the credit crisis erupted in mid-2007, Britain tops the podium for currency depreciation. Japan is the big loser. The United States and euro zone are broadly neck and neck.
Sterling has shed more than 25 percent, the flipside of the yen's almost identical rise. The dollar .DXY is a touch lower and the euro is less than four percent higher.
To the extent exchange rates reflect how investors expect relative economic performance to pan out in future, the outcome is revealing.
The ranking of currency moves since 2007 mirrors the current behavior of long-term inflation expectations seen in inflation-protected government bonds.
Britain's 10-year inflation expectations, for example, top 3 percent. Japan's are minus one percent. The U.S. and euro zone equivalents continue to hover close to presumed inflation targets of around two percent.
So for all the rhetorical dance and short-term volatility, exchange rates may well be behaving in line with their most fundamental driver -- their long-term purchasing power on the streets and the credibility of authorities to maintain that.
As Societe Generale economists point out, inflation is a poor short-term predictor of currency shifts due varying sources of price rises and different interest rate reactions.
But they add: "Inflation shocks do matter."
(Graphic by Scott Barber; Editing by Ruth Pitchford)