WASHINGTON (AP) — Global finance leaders have failed to resolve deep differences that are threatening the outbreak of a full-blown currency war.
Various nations are seeking to devalue their currencies as a way to boost exports and jobs during hard economic times.
The International Monetary Fund wrapped up two days of talks in Washington on Saturday with a communique that pledged to "deepen" its work in the area of currency movements, including conducting studies on the issue.
The communique essentially papered-over sharp differences on the currency issue between China and the United States.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.
WASHINGTON (AP) — Global finance officials are considering proposals to give the International Monetary Fund more powers to police national currencies, searching for ways to lessen growing tensions over the currency practices of China that have helped give that nation huge trade surpluses.
Treasury Secretary Timothy Geithner told the IMF's policy-setting committee on Saturday that the 187-nation lending agency must begin to speak more forcefully about how countries manage their currencies.
Geithner called on the IMF to "increase the candor of its surveillance." He said that "meaningful reform of IMF surveillance is a core challenge of the institution."
Geithner's remarks were the latest effort by the United States to bring more pressure on China to allow its currency to rise in value against the dollar.
While the United States has been leading the charge against China, Geithner's comments received support from some other nations.
Olli Rehn, the economic commissioner for the 27-nation European Union, told the IMF committee that it was important that China start "to implement soon a more flexible exchange rate regime."
Canadian Finance Minister James Flaherty told reporters late Friday that the global economy would be the loser if nations followed "beggar-thy-neighbor" currency policies that invite retaliation by other nations.
The issue of currencies dominated discussions at the annual meetings of the IMF and its sister lending institution, the World Bank. Those discussions were wrapping up Saturday.
IMF Managing Director Dominique Strauss-Kahn put forward a proposal during the discussions for the IMF to pursue a "systemic stability initiative" that would allow the IMF to work in several ways on the currency issue.
Under the proposal, which was still being refined, the IMF could hold discussions among its larger members on exchange rates and economic policies that affect exchange rates.
In describing the plan to reporters as the meetings got under way, Strauss-Kahn said the new initiative, if approved by the IMF members, could help promote global stability by providing better monitoring.
American manufacturers believe China is unfairly manipulating its currency to gain trade advantages and the Chinese yuan may be undervalued by as much as 40 percent. A weaker yuan makes Chinese goods cheaper for American consumers and U.S. products more expensive in China.
China in June announced that it would increase the flexibility of the yuan but since that time the yuan has risen in value by just 2.3 percent against the dollar.
However, the largest part of that increase has come in the past month after the Obama administration started to increase pressure on the Chinese. Additionally, the U.S. House in September approved legislation that allow the imposition of stiff trade sanctions of Chinese goods coming into the United States unless China accelerates the pace of its currency revaluation.
While the measure faces an uncertain fate in the Senate, it will give lawmakers campaigning for re-election something to discuss with voters at a time of high unemployment. The government reported Friday that the nation's jobless rate remained stuck at 9.6 percent in September.
Chinese officials continued to insist that their gentle efforts to revalue their currency was the best approach to take.
"China will move the exchange rate gradually," Zhou Xiaochuan, head of China's central bank, said during a panel discussion Friday. "We will do it in a gradual way rather than shock therapy."
Strauss-Kahn said on Friday that a particular threat to the recovery came from talk of currency wars. He urged ministers to stop trying to manipulate their currencies and to abandon "this idea that currencies can be used as a weapon."
Various other nations, including Japan, Brazil and South Korea, also have taken steps to keep their currencies weaker in an effort to increase their exports. And in the United States, expectations of further monetary easing by the Federal Reserve have driven the dollar down significantly against the euro and other major currencies.
Addressing the IMF and World Bank meetings on Friday, Strauss-Kahn said the slow pace of job creation remained a major concern. "We really face the risk of a lost generation" of young people unable to get work, he said.
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