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G7 Countries Condemn Exchange Rate Volatility - 2004-02-08

Finance ministers from the world's seven richest industrialized nations, known as the G7, have condemned what they describe as excessive volatility in global currency markets. The statement came at the end of a two-day meeting of the G7 ministers in Florida, Saturday.

Meeting in Boca Raton, Florida, just north of Miami, the G7 finance ministers, agreed to compromise on whether or not the U.S. dollar should continue its slide against the euro.

A communiqué issued at the end of the meeting says the ministers reaffirm that exchange rates should reflect economic fundaments. But, it also says excess volatility and disorderly movements in exchange rate markets, are undesirable for economic growth.

European and U.S. finance officials have disagreed recently about whether the dollar should continue its slide. In recent weeks the dollar has reached record lows against the euro, the common currency of 12 European markets.

Europeans have complained that a cheap dollar makes their goods more expensive. However U.S. officials say a cheap dollar helps U.S. exports, which helps reduce the U.S. trade deficit.

Speaking to reporters following the meeting, U.S. Treasury Secretary John Snow said the Bush administration supports the dollar but feels markets are the ultimate exchange rate mechanism.

"A strong dollar is, and has been, the policy of the United States for a long time," he said. "A strong dollar is our national interest. But, the relative values of currencies are best established in open competitive currency markets."

In a reference to Asian countries like China that peg their currencies to the dollar, the ministers called for greater flexibility in exchange rates of nations where flexibility is limited. Asian goods have also benefited from the dollar's slide.

The G7 ministers from the United States, Britain, Canada, France Germany, Italy, and Japan also singled out Argentina - saying Argentine officials should push ahead with economic reforms - and engage constructively with creditors who are holding more than $80 billion in loans Argentina defaulted on in 2001.

The ministers pledged support boosting economic growth in Iraq and Afghanistan. They also said that while the global economic recovery is getting stronger it remains uneven, and countries need to do more to boost their economic growth.