G7 finance chiefs say excessive forex moves bad for global economy

Finance chiefs from the Group of Seven countries on Wednesday reaffirmed their view that excessive movements in foreign exchange rates can have adverse effects on economic stability.

A joint statement released after their meeting in Washington also said they will “ensure close coordination of any future measure to diminish Iran’s ability to acquire, produce, or transfer weapons to support its destabilizing regional activities.”

The finance ministers and central bank governors of the world’s major industrial democracies, including Japan, Germany and the United States, condemned Iran’s unprecedented attack on Israel over the weekend in retaliation for a strike on its embassy compound in Damascus on April 1.

The ministers and governors held talks on the sidelines of the International Monetary Fund and World Bank spring meetings.

They reconfirmed the group’s 2017 exchange rate commitments, at a time when the Japanese yen and many other currencies have fallen sharply against the U.S. dollar on the back of robust growth in the world’s largest economy and receding expectations of an interest rate cut by the Federal Reserve in the near future.

The G7 members reaffirmed in Italy in May 2017 their “commitments to market determined exchange rates” and agreed to “consult closely in regard to actions in foreign exchange markets.”

They also recognized at the time that “excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability.”

The meeting on Wednesday, chaired again by Italy which holds the G7 presidency this year, was dominated by geopolitical risks to the global economic outlook, mainly from Russia’s ongoing war against Ukraine and the escalating tensions in the Middle East.

They said the seven countries, as well as the European Union, will continue to assist Ukraine in meeting its urgent short-term financing needs.

To ensure Moscow pays for the damage it has inflicted on Ukraine, they said the G7 countries will continue to explore “all possible avenues” for using frozen Russian sovereign assets to help the war-torn country.

They suggested reaching a conclusion by the group’s summit in June on how best to use the assets in line with their respective legal systems and international law.

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