SaKong expects G20 nations to reach common ground before Seoul meeting
The chief organizer of the Group of 20 summit on Wednesday dismissed concerns that an escalating global battle over currencies will dampen world leaders’ efforts to promote balanced growth and make the world financially safer.
SaKong Il, the chairman of the Presidential Committee for the G20 Summit, told The Korea Herald that countries are expected to get closer to solving the dispute through a series of discussions before the Nov. 11-12 meeting.
“It is in every (G20) nation’s best interest to settle the issue. I am hopeful that G20 nations will be able to reach common ground on the exchange rate policies by the Seoul summit,” he said.
The issue of monetary reform is currently being discussed as part of G20’s mutual assessment process ― a peer review system led by the International Monetary Fund to come up with policy recommendations for G20 nations, he and aides said.
Financial ministers and central bank chiefs will hold a meeting in the southern city Gyeongju from Oct. 22-23.
He stressed that the world’s premier economic forum would be the only global organization to effectively fight a rise of protectionism both in advanced and emerging market countries, thus preventing a repeat of the Great Depression that struck in the 1930s.
“The success of the Seoul summit is crucial not only for Korea but also world economy,” he said.
He added that the November meeting will lay ground for institutionalizing the G20 forum, including the establishment of its secretariat, as a premier committee to deal with challenges the world faces beyond economic issues.
The Korean won advanced to an intra-day high of 1,118.10 to the U.S. dollar, breaking the 1,120-won level for the first time since May 4.
It closed at 1,118 won to the dollar, after gaining 1.12 percent from Tuesday’s close.
Speculation that the U.S. Federal Reserve will join Japan in increasing its money supply is adding to speculation that the won will strengthen over the next few weeks.
Pressure for the G20 as a mediating channel is growing high as more nations intervene in the currency market, following Japan’s lead.
Economists at the Samsung Economic Research Institute expect the won to appreciate up to 3 percent against the greenback by the end of this year, driven by the race for cheaper currencies.
Governments of India, Brazil, Thailand and Peru are stepping up efforts to control their currencies in order to absorb a record amount of money flowing into their emerging markets.
Brazil doubled its tax on fixed-income securities for foreigners to 4 percent Tuesday. Thai authorities also said it is mulling ways to curb the baht which rose to a 13-year high the same day.
Also on the same day, Japanese authorities bought 60 billion of assets and cut its benchmark interest rate to 0.1 percent.
The market’s biggest concern is with the U.S. and China.
U.S. President Barack Obama and a trio of top eurozone officials have urged Chinese Premier Wen Jiabao to make the yuan more flexible.
French President Nicolas Sarkozy on Monday put forward reforms of the global monetary system as a key G20 agenda for next year. France takes over the presidency of the G20 next year.
Seoul yesterday said it will start an audit of banks handling foreign currency derivatives starting Oct. 19 to calm volatile capital flows.
The currency debate and concerns about protectionist policies are expected to dominate the annual meeting of the IMF’s 187 states this week in Washington.
“Addressing exchange rate issues should also be a key priority for multilateral negotiations among a core group of major economies,” said Charles Dallara, head of the Institute of International Finance, a group of the world’s largest banks.