Currency row raises fears of international trade war
CBI boss Richard Lambert today warned that the row between leading nations over currencies could balloon into a full-blown trade war, as G20 finance ministers made their latest bid to end the dispute in Seoul.
Washington is locked in battle with China over the Asian giant artificially holding down the value of the yuan to support its exports, but the row has taken on huge political significance ahead of US mid-term elections next month.
Lambert said: "When you see the US Congress talking about trade barriers against China and China using the language they are in return, and the Brazilian finance minister talking about trade wars, it all gets a bit scary."
The US Federal Reserve is dropping hints it is prepared to switch on the printing presses again to devalue the dollar and could act in weeks.
Japan has also intervened in currency markets twice over the last month in a bid to lower the value of the yen.
But hopes of a resolution looked distant today as ministers struggled to thrash out a deal. A call by US Treasury Secretary Tim Geithner for a 4% cap of GDP on national surpluses and deficits — aimed at China — looks certain to be rejected.
The IMF and World Bank's autumn summit in Washington was dominated by the issue two weeks ago, but broke up without agreement.
A draft communique issued ahead of the weekend's discussions called on G20 nations to "refrain from competition undervaluation".
