Article from ny times about the currency war (g-20)

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G-20 Vows to Avoid a Currency War

Moving to shore up the “fragile and uneven” recovery, officials from the world’s 20 biggest economies promised Saturday to refrain from weakening their currencies, agreeing to let the markets exert more influence in setting foreign exchange rates.
The officials also decided to give fast-growing countries a greater say at the International Monetary Fund,which monitors nations’ fiscal and monetary policies, an acknowledgment that the fund’s credibility required more representation from these nations. They also strengthened the I.M.F.’s role in assessing whether G-20 members were meeting their commitments.
The finance ministers and central bankers were at a two-day meeting in Gyeongju, South Korea, and their actions represented another step in theeffort to bridge the diverging priorities of the leading economies and ease the strain of simmering disputes.
The intense talks — built largely around an agenda the Americans brought to the meeting — yielded more consensus than many officials had expected. In general, the United States refrained from putting more public pressure on China to revalue its currency, preferring instead to emphasize thebenefits of reducing trade imbalances.
Seeking to find common ground on currency valuation, officials agreed to “move toward more market-determined exchange rate systems that reflect underlying economic fundamentals.” And they pledged to “refrain from competitive devaluation of currencies” — an effort to calm anxiety over a wave of protectionism in which countries would weaken their currenciesto bolster their own exports.
Threats of such a “currency war” have unsettled markets and threatened to hinder a flagging global recovery.
The language adopted Saturday was the strongest yet from the G-20, which operates through consensus and peer pressure but lacks binding authority, following warnings by the United States that rapidly developing countries were trying to keep their currenciesfrom rising, setting off a “damaging cycle” of “competitive nonappreciation.”
For their part, the richest countries, like the United States and Britain, both with large deficits, agreed to be “vigilant against excess volatility and disorderly movements in exchange rates.”
On the issue of trade, the United States failed to secure support for a numerical limit on the surplus or deficit of thenations’ current account balances, the broadest measure of a country’s trade and investment. The Americans had proposed that surplus and deficits be reduced to less than 4 percent of gross domestic product by 2015.
Such a deal would have obliged two export giants, China and Germany, to stimulate domestic consumption and rely less on foreign consumers. China in particular would have faced newpressure to let its currency, the renminbi, rise against the dollar.
Instead, G-20 members pledged to “pursue the full range of policies conducive to reducing excessive imbalances.”
That language was not as firm as Treasury Secretary Timothy F. Geithner had sought, but he called the pledge a step forward.
“The most important thing we achieved is agreement on a framework for curbing excess tradeimbalances in the future,” Mr. Geithner said. On Sunday, he will make a previously unannounced trip to Qingdao, China, where he was to meet with Wang Qishan, the Chinese vice premier for economic issues.
The French finance minister, Christine Lagarde, said that Mr. Geithner “probably would have liked specific targets,” but Olli Rehn, Europe’s economic and monetary affairs commissioner, said that“setting specific numerical targets would have been easily counterproductive.”
Germany, Russia and Italy were among the countries that opposed the 4 percent proposal, officials said.
One significant development was the agreement on changes to how the I.M.F. is run. The G-20 agreed to transfer more than 6 percent of voting power within the I.M.F. to “dynamic emerging-market and developing...
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