Published March 05, 2013
WASHINGTON – Emerging economies with managed exchange rates could harm growth in other countries, contributing to 'beggar thy neighbor' currency policies, U.S. Treasury official Lael Brainard said on Tuesday.
"The managed exchange rates regimes of some of the most systemically significant emerging market economies and the market-based monetary and exchange rate frameworks of the world's reserve currencies create inevitable tensions that fuel protectionist pressures," Brainard told a conference in Washington.
She called on all countries in the Group of 20 advanced and emerging economies to stick to their commitment to not target exchange rates to make their economies more competitive. The G20 countries had signed on to the statement during meetings in Moscow last month.
The United States, along with the other countries in the Group of Seven nations, also released a separate statement at the time, pledging to avoid targeting a specific exchange rate and focus only on domestic needs.
Top central bankers in recent months have spoken out over the risk of competitive devaluations as policymakers in advanced countries, particularly Japan and the United States, aggressively pursue easy monetary policies, which can have the effect of weakening their currencies on foreign exchange markets.
Brainard said the G7 statement allows countries to target domestic needs with their monetary policy and domestic asset purchases, as long as they are not trying to manipulate their exchange rates.
"And G-7 members have also been clear in ruling out the pursuit of macroeconomic accommodation through the purchase of foreign assets, which does not contribute to advancing global demand," she added, during remarks at a conference of the National Association for Business Economics.
In response to a question, Brainard said China, which manages its exchange rate, has made some progress in strengthening its currency against the dollar.
"But more progress is needed," she said. We will continue to push very hard on those commitments."
(Reporting by Anna Yukhananov; Editing by Chizu Nomiyama)