G7 meeting looms

Policymakers from the Group of Seven (G7) rich nations’ club meet in London on Feb. 4-5 in a much anticipated bi-annual gathering, and are expected to discuss the dollar’s three-year slide and the issue of currency flexibility, particularly in Asia.

At the start of the year, speculation that China might revalue its currency after the fall G7 meeting boosted other Asian currencies, such as the yen (see “What’s on the Horizon For the Chinese Yuan”).

China and India will be included in the meetings this time around. The U.S. dollar’s slide vs. the Euro and yen is expected to generate debate at the talks. Recent G7 meetings have called for more flexibility in currency exchange rates in an attempt to encourage parts of Asia — especially China — to relax exchange rates.

Theory has it that if China lets its yuan revalue, others in Asia will be under less pressure to keep their currencies low vs. the dollar to ensure their exports remain competitive in terms of price on world markets. In late January, a news organization reported that a Chinese official said the country needs time before allowing its pegged currency to appreciate.

U.S. Treasury Secretary John Snow said he does not expect G7 ministers to alter the group’s position on currencies from last February, when they spoke out against “excessive volatility” in currency markets.