Excessive Fluctuation of Exchange Rates Undesirable

The G7 meeting closed by announcing that excessive fluctuation of exchange rates is undesirable. Finance ministers and central bankers from the Group of Seven (G7) most developed economies gathered to coordinate their stance on the plunging value of the U.S. dollar.

“Excessive fluctuation of exchange rates and their unpredictable moves are undesirable for economic growth,” announced G7 nations, wrapping up the two-day meeting in Boca Raton, Florida.

The dissatisfaction of the EU and Japan was apparent at the meeting, while compromising the U.S. position on the weak dollar at the same time.

Accordingly, the financial market will not be caught up in another shock. At the last September’s G7 meeting in Dubai, United Arab Emirates, the parties approved the weak dollar by announcing the need for flexible exchange rates, allowing for the dollar to tank.

“It is desirable for countries with inflexible exchange rates to be more flexible,” said G7 statements targeting China. It is under pressure to revalue the yuan, which is fixed at the 8.276 to 8.28 range against the dollar.

To that end, one Chinese business newspaper reported on Saturday that the yuan might be appreciated next month by five percent at the highest. But, as the People’s Bank of China expressed its skepticism on the appreciation early this year, it is watching how things will turn out.

Yoo-Sung Hwang Seung-Jin Kim yshwang@donga.com sarafina@donga.com