US 'currency war' is focus for G20 finance ministers

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Further efforts will be made to end the so-called currency war between the US and China this week at the first meeting of G20 finance ministers under French leadership.

The Chancellor, George Osborne, will meet 19 counterparts from the world's leading economies in Paris on Friday, after a meeting of EU finance ministers in Brussels tomorrow in the shadow of renewed pressure on the euro and Portuguese sovereign debt.

There is a widespread expectation that the French chairmanship of the G20 will take a more muscular approach than last year's stint under South Korea, during which progress stalled on resolving global imbalances and reaching international agreement on banking reform.

Much of the focus this week will be on US-China relations. Since the leaders' summit in Seoul last November, the US has launched its second round of quantitative easing, a move indirectly intended to drive down the value of the US currency. Yet China has shown little inclination to allow the yuan a radical revaluation, though higher Chinese inflation is helping.

The French President, Nicolas Sarkozy, has said a concern for his time as head of the G20 is "moving toward more market-determined exchange-rate systems".

At a time of rapidly rising commodity prices, the French government also wants to find a solution to the volatility threatening global food security. With the Saudi government at the G20, there may also be a pledge on controlling the oil price, especially as the Egyptian revolution may spark further price rises beyond $102 per barrel.