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G7 positions on dollar ahead of Florida meeting
LONDON, Feb 4 (Reuters) - Finance ministers and central bankers from the Group of Seven (G7) most developed economies are scheduled to meet in Florida on February 6 and 7 amid concern about the steep fall of the U.S. dollar. Following is a snapshot of developments and key facts: LATEST NEWS * The dollar rose moderately against major currencies on Wednesday, following release of firmer-than-expected U.S. economic data that reinforced expectations of a stronger U.S. recovery this year. * G7 Finance ministers will discuss the Chinese currency when they meet later this week in Florida, as well as capital and trade flows in both China and Asia as a whole, a Canadian official said Wednesday. * France will press for structural reforms in the U.S. and Japan, not just the euro zone, at the G7 meeting, a French Finance Ministry source said on Wednesday, but made no mention of France's position on currency levels. * ECB Executive Board member Gertrude Tumpel-Gugerell was quoted on Wednesday as saying the strong euro has a large impact on exports but that its current levels were not unusual. * The impact of a strong yen on the Japanese economy could have significant global implications and the G7 share Japan's concerns, Haruhiko Kuroda, adviser to Japan's cabinet, said. He expected Japan to reiterate its concerns about the yen's rise at G7 but did not think the US wants the dollar to fall further. * Japan's Finance Minister Sadakazu Tanigaki said on Wednesday that currencies should reflect economic fundamentals and move stably, adding Japan would act when markets overshoot. * Japan's top financial diplomat, Zembei Mizoguchi, said on Wednesday currencies should reflect economic fundamentals and that Tokyo's stance on foreign exchange remained unchanged ahead of a meeting of G7 finance ministers this week. * U.S. Treasury Secretary John Snow said on Tuesday the U.S. favored currencies set by market forces, adding exchange rate flexibility would help the world economy adjust in a healthier fashion. * A disorderly fall in the dollar is among the risks marring an otherwise optimistic outlook for the U.S. economy, the Federal Reserve Bank ( News - Websites ) of Dallas said in a report on Tuesday. KEY QUOTES "..the euro's current high level has a massive impact on exporters. One has to see however, that the effective exchange rate... is roughly at a level that we have seen in the past... The speed of the movements...is a bigger problem (than the level)" - ECB's Tumpel-Gugerell. -- "We will stress that structural reforms are necessary in all (economic) zones....Of course, Japan has a great deal to do, the U.S too, in areas such as financial imbalances which pose sustainability problems," - French finance ministry source. -- "..It would be bad for the global economy if it (Japan) were to slip back into recession and deflation worsened because of a higher yen...There is no difference of opinion on this (in the G7)"-- Japan cabinet advisor Kuroda. -- "I don't think the U.S. wants the dollar to fall further, given it has already fallen more than 10 percent since September and even more over the last two years" -- Japan cabinet advisor Kuroda. -- "Over the medium term, it is important moves in the foreign exchange market reflect fundamentals and that currencies move in a stable manner... Flexibility is important. Its just a matter of whether it reflects fundamentals." -- Japan finance ministry's Zembei Mizoguchi. -- "We favor a strong dollar. We think it's good for the country but we think the value of currencies -- not just the dollar but the dollar vis-a-vis other currencies, the exchange value of currencies, is best set in open, competitive markets" -- U.S. Treasury's Snow -- "Further declines in the dollar pose an unusual risk because an orderly retreat would be a plus for short-run growth, while a disorderly one might be a net minus if the impact of financial market disruption more than offsets gains in net exports," -- Dallas Fed economist John Duca. ---------------------------------------------- KEY UPCOMING EVENTS - see (M/DIARY) for more detail * Following G7 central bank policy meetings scheduled: ECB: Feb 5 BOJ: Feb 4/5 BOE: Feb 4/5 * OTHER EVENTS- WEDNESDAY FEBRUARY 4 U.S. Treasury Secretary John Snow testifies on the fiscal 2005 Budget before the House Budget Committee, 1900 GMT. THURSDAY FEBRUARY 5 FRANKFURT- ECB President Jean-Claude Trichet gives a news conference at 1330 gmt after the Governing Council's decision on interest rates is announced at 1245 GMT. TOKYO- Bank of Japan (BOJ) Governor Toshihiko Fukui holds news conference at 0630 GMT after the end of the BOJ monetary policy meeting. FRIDAY FEBRUARY 6 BOCA RATON, Florida- G7 finance ministers meet (to February 7) hosted by U.S. Treasury Secretary John Snow. ----------------------------------------------------- KEY FACTS G7 finance ministers - from U.S., Japan, Germany, France, Britain, Italy and Canada - last met in Dubai on Sept 20, 2003. The key passage of their communiqué said "We reaffirm that exchange rates should reflect economic fundamentals. We continue to monitor exchange markets closely and co-operate as appropriate. In this context we emphasise that more flexibility in exchange rates is desirable for major countries or economic areas to promote smooth and widespread adjustments in the international financial system, based on market mechanisms." Since the Dubai meeting, the dollar has fallen: -10.33 percent against the British pound -12.06 percent against the euro -7.53 percent against the yen -1.19 percent against the Canadian dollar -8.68 percent on a trade-weighted basis Back to Original Article: Mortgage News You Can Use
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