G20 kicks off today and currency war fears dominate

As countries jostle to weaken their currencies to stimulate growth, this G20 meeting in Seoul, Korea may not achieve much new. All agree that other countries should not engage in currency manipulation but each country wants to retain the right to do so. My reading is that if currencies followed the actual situation on the ground then the Dollar and Chinese Yuan ought to appreciate, the Yen should depreciate and the Euro should stay roughly where it is balanced between the German strength and the Ireland effect. The Indian Rupee and the Brazilian Real are probably undervalued as well.

Alan Greenspan continues to have his unsettling effect on the world economy.

"YES" Currency symbols sculpture:


Rancorous debate over global economic imbalances and currency strains dogged the G20 as world leaders gathered for a summit in Seoul on Thursday despite U.S. efforts to shore up the group’s unity. Behind the scenes, negotiators squabbled over the language in a closing statement to be issued at the summit’s conclusion on Friday. The final version may not venture far beyond agreements reached by G20 finance ministers last month, yet it was still proving difficult to agree on the wording.

A major irritant in the run-up to the meeting was the U.S. Federal Reserve’s bond-buying spree to revive the economy. Former Fed Chairman Alan Greenspan stirred that pot, saying the United States was pursuing a policy of weakening the dollar.

“The U.S. will never do that,” U.S. Treasury Secretary Timothy Geithner shot back a few hours later in an interview with CNBC. “We will never seek to weaken our currency as a tool to gain competitive advantage or to grow the economy.”

China’s yuan, also known as the renminbi, rose 0.25 percent on Thursday and has climbed almost 3 percent since Beijing loosened its grip on the tightly managed currency in June. Washington has welcomed the slow-but-steady appreciation, although it has said more movement is needed.

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