GYEONGJU, South Korea (Reuters) - Group of 20 nations should refrain from currency policies aimed at gaining a competitive edge, U.S. Treasury Secretary Timothy Geithner said in a letter to G20 finance chiefs.
Geithner also said that nations with undervalued currencies should neither try to weaken them or stand in the way of gains and G20 members should aim to reduce their current account imbalances below specified percentage of gross domestic product,
according to a letter obtained by Reuters on Friday.
“G-20 emerging market countries with significantly undervalued currencies and adequate precautionary reserves need to allow their exchange rates to adjust fully over time to levels consistent with economic fundamentals,” Geithner wrote.
G20 finance officials started their formal two days of meetings on Friday with nations from the developing world and Japan dismissing the U.S. proposal to set a target of 4 percent of gross domestic product for current account surpluses and deficits, a measure that appeared aimed at China’s trade surplus.
China, Russia, Germany and Saudi Arabia are all running trade surpluses above the mooted threshold while the United States is running a deficit of around 3 percent of GDP.
A senior G20 official however put the chances for an agreement on current account targeting at even.
Reporting by Gernot Heller; Editing by Ed Lane and Tomasz Janowski