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G-20: We'll avoid currency war

By Aaron Smith, staff writer


NEW YORK (CNNMoney.com) -- Leaders of the G-20 nations on Friday agreed to "refrain" from all-out currency warfare, but failed to meet high expectations that they would come up with a plan to stabilize the world economy.

Completing a two-day summit in South Korea, the G-20 nations released their so-called Seoul Action Plan, a communiqué that outlines a wide range of macroeconomic policies.

The general goal, as stated at the outset of the world financial crisis in 2008, is to try and prevent the world from sliding into another economic slump.

"The actions agreed to today will help to further strengthen the global economy, accelerate job creation, ensure more stable financial markets, narrow the development gap and promote broadly shared growth beyond crisis," read the G-20 plan.

One of the many pledges is to "refrain from competitive devaluation of currencies." This is a direct reference to one of the more contentious subjects in international financial relations: the currency dispute between the United States and China.

"Advanced economies, including those with reserve currencies, will be vigilant against excess volatility and disorderly movements in exchange rates," read the G-20 plan.

U.S. critics believe that China is keeping its currency, the yuan, artificially low by hoarding reserves, keeping its exports cheap and undercutting international competitors.

U.S. Treasury Secretary Tim Geithner has tried to sort out the problem and defend against claims that the United States is deliberately weakening the dollar.

However, the conclusion of the G-20 summit failed to convince experts that any real progress had been made, particularly in the U.S-China currency dispute.

"The failure to agree to any definitive action should come as no surprise to the currency markets," said Mark O'Sullivan, director of dealings at Currencies Direct, a London-based currency transfer services company. "The vague set of indicative guidelines issued in the final communiqué, really once again underlines how little effect the G-20 can have on the current problems the global economy faces."

The G-20 said it will hold its next summit in France in 2011, followed by the 2012 summit in Mexico. To top of page

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