NEW YORK (Forex News Now) – If the realtime forex news from the last two weeks is any indication, this Friday’s meeting of the finance ministers of the G20 in Gyeongju, South Korea promises little in the way of constructive, multilateral solutions for the current global currency imbalance.
The meeting, held semi-annually by the Group of 20 Finance Ministers and Central Bank Governors, is supposed to gather the financial policymakers of the top 20 developed nations in the world for the purpose of arriving at collective solutions for dealing with problems and issues in the global financial system. While previous summits have been hit or miss, experts were hoping that November’s summit – and the finance minister’s meeting this Friday – would lead to promising solutions.
The hopes for a constructive and collective solution to increasing currency friction, though, have grown doubtful.
Finance ministers are scheduled to come together this Friday amid the current tensions enveloping the global forex markets – especially a ‘mini currency war’ brewing between rival exporters Japan and South Korea, the host of the summit. The goal is to set the agenda for the larger summit held in November, but that goal is likely to be overshadowed by conflict over currency rates and intentional devaluation.
Realtime forex news last week revealed that Japan and South Korea have been trading barbs over South Korea’s recent interventions into the forex markets to control the rising value of the won. Japan, voicing displeasure at this move, has drawn fire from South Korea for essentially doing the same with the rising yen.
Both export-driven countries are seeking to devalue their respective currencies because rising domestic currencies hurt economies that are net exporters because higher currencies make exported goods more expensive.
China vs. US
The smoldering conflict between China, the United States, and other major industrialized states also threatens to overshadow the meeting and the summit. On Tuesday, China announced a surprising rate increase, and has repeatedly fought off demands from the U.S. and others to float the yuan and allow it to rise in value.
These conflicts and others threaten to undermine cooperation in the international financial community as more countries weigh decisions to engage in stimulatory monetary policies in an attempt to spur flagging economic growth. Most experts see a need for close cooperation between G20 members, but the high-profile, realtime forex disputes could prove to be a formidable obstacle.
All forex investors should keep a close eye on the agenda that will be set by this Friday’s meeting to see what will be addressed at November’s summit – and if it will actually manage to help rather than harm.