US Treasury Will Ask Governments to Use Fiscal Policy not FX Manipulation at G20

The United States will call on G20 countries this week to use fiscal policy in order to boost global demand, a senior U.S. Treasury official said on Monday.

“We will urge greater use of policy space, including fiscal space, to bolster global demand. That would lead to strengthened confidence and I would expect reduce volatility,” the Treasury official said in a preview call with reporters ahead of a G20 meeting later this week in Shanghai, China.

G20 finance ministers, including U.S. Treasury Secretary Jack Lew, and central bank governors will meet on Feb. 26-27, with sagging global growth, divergent monetary policies and currency devaluations set to dominate the agenda.

While there, the United States will also urge all members to refrain from manipulating exchange rates for competitive purposes, in line with existing G20 commitments, said the official, who spoke on condition of anonymity.

“I see those commitments as being a strong indication from G20 members that they will manage their currencies in ways that are globally consistent. I think that those commitments are very, very important,” the official said.

Lew has repeatedly called on China to more clearly communicate its currency policies and actions amid uncertainty over Beijing’s transition to a market-determined exchange rate.

Recent Chinese efforts to improve its communications have been constructive, the official said.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, he established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza