No deal on dollar as US shrugs off European pressure

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The Independent Online

Europe and Japan failed yesterday to persuade the United States to address the decline in the dollar, despite talks at a fractious meeting of the Group of 20 industrialised and developing nations.

Europe and Japan failed yesterday to persuade the United States to address the decline in the dollar, despite talks at a fractious meeting of the Group of 20 industrialised and developing nations.

The two camps blamed each other for the currency's fall and for failing to take action to stem it. The US refused to accept German proposals that the group should condemn volatile currency moves.

Last week, the dollar dropped to a record low of $1.3074 against the euro and to a more than four-year low to the yen at 102.67. Analysts said the absence of a co-ordinated stance among the G-20 was likely to lead to further weakening of the dollar.

The final statement issued by the G-20 yesterday failed to mention currency swings explicitly and simply called for greater flexibility in Asian currencies - a couched reference to China's yuan exchange rate, which is pegged to the dollar. That means the euro and the yen are bearing the brunt of the dollar's fall, damaging exports.

The US insisted the dollar's decline was not on the agenda at the meeting, while European politicians have been anxious for action to stem the rise in the euro that threatens to bring their economy to a halt.

Hans Eichel, Germany's finance minister, said he would be lying if he said foreign exchange rates had not been an issue at the meeting. "Of course, we did talk about the imbalances in the world economy. It was part of our debate," he said.

European policymakers have blamed the falling dollar on the ballooning US budget and current account deficits. The US struck back yesterday when the Treasury Secretary John Snow said: "Addressing global imbalances in particular is a shared challenge." He said the US would halve its record budget deficit over the next four years, but added: "Growth among our trading partners including those here in Europe also needs to increase and that requires addressing structural barriers that stand in the way of better performance." Both Germany and France grew a meagre 0.1 per cent in the third quarter.

The G-20 statement said: "We expect that the macro-economic environment will remain favourable in the next year... However, downside risks have increased due to oil price volatility, persisting external imbalances and geopolitical concerns." It said US budget consolidation and structural reforms in Europe and Japan were necessary to foster stability.

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