SEOUL: The Group of 20 advanced and emerging economies in a statement Friday declared that the group will monitor developments for signs of countries artificially deflating their currencies. In the final statement of the summit, the group's fifth since the financial crisis plunged the world into recession in 2008, the leaders vowed to move toward market-determined exchange rates and shun competitive devaluations. The leaders vowed to refrain from “competitive devaluation of currencies” and launched a process to craft “indicative guidelines” to reorient unbalanced trade between surplus and deficit nations. British Prime Minister David Cameron said it was significant the G20 had recognized that global imbalances posed a problem and was alive to concerns of a race to the bottom. He praised the G20 for putting in place a mechanism that will allow the International Monetary Fund to assess countries and the effects of their exchange rate policies. Downplaying concerns the issue had been “kicked into the long grass” he said it was significant there was a timetable for addressing concerns at the next G20 summit in France. The summit set “indicative guidelines” to measure imbalances between their multi-speed economies but – calling a timeout to let tempers cool – left the details to be discussed in the first half of next year. Washington argued progress toward a more balanced global economy is undermined by China's policy of undervaluing its currency. China has stockpiled its trade surpluses while the US has been left with record trade deficits. China responded that moves by the Federal Reserve to print money were also having a distorting effect. “Exchange rates must reflect economic realities … Emerging economies need to allow for currencies that are market driven,” US President Barack Obama told a news conference after the communique was agreed. “This is something that I raised with President Hu [Jintao] of China and we will closely watch the appreciation of China's currency.” The G20 said it would allow emerging market countries with “adequate reserves and increasingly overvalued flexible exchange rates” to use “carefully designed macro-prudential measures”. That is a green light for countries such as Brazil, which has already sought to stem massive inflows of capital, to take further measures, short of deliberately engineering a lower exchange rates. The G20 accounts for around 90 percent of global economic output, and is far more representative of the world than the more exclusive G8, which it has supplanted as the pre-eminent forum for economic debate. However, the immediate reaction from financial markets was unimpressed. Adam Cole, global head of currency strategy at RBC Capital Markets in London, said the G20 statement “could hardly have been more watered
