Washington: World finance leaders on Friday will try to soothe simmering currency tensions which threaten to drag on an economic recovery that is already too slow and uneven for their liking.
The Group of 20 finance ministers scheduled a working breakfast on the sidelines of this weekend’s International Monetary Fund and World Bank twice-yearly meetings.
The smaller G-7 grouping of advanced economies holds a closed-door dinner later on Friday.
Neither group is expected to issue a formal statement, but G-20 officials said foreign exchange matters will be discussed at both events amid concerns that countries will intentionally weaken their currencies to pursue export-led growth.
China, usually at the center of the currency debate, has company this time. Officials are still leaning on Beijing to allow the yuan to rise more rapidly, but Japan’s intervention last month to weaken the yen put Tokyo on the hot seat, too.
The United States can also expect criticism over its seemingly benign neglect of the sinking dollar, which has led investors to chase bigger returns in emerging markets such as Brazil, driving up asset prices and inflation.
“What we all want is a rebalancing of the global economy and this rebalancing cannot happen without ... a change in the related value of currencies,” IMF managing director Dominque Strauss-Kahn said on Thursday.
The currency strains are symptomatic of a deeper problem: most advanced economies are not growing rapidly enough to reduce unemployment despite trillions of dollars in government stimulus spending and emergency loan guarantees.
US treasury secretary Timothy Geithner may get an unpleasant reminder of that when US monthly employment data is released on Friday -- right in the middle of the G-20 breakfast.
Economists polled by Reuters think the report will show virtually no net growth in employment, with the jobless rate ticking up to 9.7%.
For Geithner and most of his European counterparts, options for providing more stimulus are limited because either politics, creditors or both prevent them from amassing significantly larger piles of government debt.
Until rich nations find their footing, emerging markets will be the strongest source of global growth. So far, they appear to be up to the task. The IMF expects emerging markets to grow at three times the pace of advanced economies.
Those countries are clamoring for greater decision-making power at the IMF, commensurate with their growing economic prowess. This has been another thorny issue for G-7 and G-20 leaders who have yet to agree on how exactly to divvy up power when no one wants to relinquish their own position.
The United States thinks Europe ought to give up some if its seats on the IMF executive board, while European countries have proposed a seat-sharing rotation.
IMF officials are scheduled to attend Friday’s G-20 breakfast, and are hopeful that some progress can be made toward resolving reform issues by a G-20 leaders summit in Seoul next month.