President Barack Obama says the strength of the dollar rests on sustaining the United States expansion as the Group of 20 officials remain divided over whether the Federal Reserve is helping or harming the world economy.
Obama joined his G20 counterparts at a summit in Seoul which began yesterday, defending
America's economic policy by arguing growth in his country is the most important contribution the US can make to the global recovery and that its fundamental strength will ultimately determine the dollar's value.
His comments, contained in a letter to fellow leaders, are the latest attempt to blunt criticism from other nations that last week's decision by the Fed's policy makers to buy US$600 billion ($763 billion) in assets risks undermining their economies by weakening the dollar and flooding emerging markets with capital.
That argument was made again by Brazilian Finance Minister Guido Mantega, who said the G20 may discuss diluting the dollar's role as a reserve currency to lessen its power in global markets.
British Chancellor of the Exchequer George Osborne rebutted that thought and said "it's in the interest of everyone" that US domestic demand rebounds and that the Fed is trying to deliver that.
Such differences suggest the G20 will struggle to unite over how to narrow imbalances in the world economy after its reliance on excess US demand and Chinese savings helped spark the worst credit crisis since the Great Depression.
A US proposal to set guidelines for current-account deficits and surpluses has already run into opposition from export powerhouses China, Germany and Japan.
Kim Yoon Kyung, a spokesman for South Korea's G20 preparation committee, said discussions among officials over currencies had been contentious.
"We had to open the door because the debate was so animated and the room was getting hot," he said. The talks are infected by suspicion that members are each pursuing independent strategies to boost growth through weaker currencies.
As the US lobbies China to let the yuan appreciate faster, its message is being weakened by the accusation that the Fed's monetary policy is hurting the dollar.
Caught in the middle are emerging markets with floating currencies, which are embracing capital controls or intervening to stay competitive.
Obama sought to share the responsibility for underpinning the international economy by urging countries "that have previously relied on exports to offset weaknesses in their own demand".
America's exports climbed to the highest level in two years in September, according to data released by the Commerce Department.
"When all nations do their part - emerging no less than advanced, surplus no less than deficit - we all benefit from higher growth," Obama said.
Acknowledging a two-speed global recovery, US Treasury Secretary Timothy Geithner pushed for co-operation with colleagues from Australia and Singapore on the Wall Street Journal's website.
"The challenges facing us now are those of working for the common good in a world of widely differing economic conditions," he wrote.
"The world faces two very different transitions to stable growth."
GROUP OF 20
* The G20 was established in 1999 to bring together major advanced and emerging economies and stabilise the global financial market.
* The G20 members are: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain, United States, and the European Union.
* This year's summit is being held in Seoul, South Korea. It started yesterday and finishes today.
- Bloomberg
President Barack Obama says the strength of the dollar rests on sustaining the United States expansion as the Group of 20 officials remain divided over whether the Federal Reserve is helping or harming the world economy.
Obama joined his G20 counterparts at a summit in Seoul which began yesterday, defending
AdvertisementAdvertise with NZME.