The G20 group of richest nations must act to avoid a currency war and halt a damaging drift toward fragmented regulation, the world’s leading banks said Monday.
The Institute of International Finance, representing more than 470 financial firms, warned of the consequences of “possible discord on exchange rates” as countries rely on monetary policy easing to get their economies growing again.
“We believe major central banks should focus on enhancing their cooperation, especially of their communication strategies, to guide market expectations and thus help avoid a disorderly interest rate adjustment process and undue exchange rate volatility,” the IIF wrote in a letter to Russian Finance Minister Anton Siluanov, who is chairing the G20 meeting later this week.
Currency markets have witnessed some hefty gyrations in recent months due to widening gaps between the policies of the world’s major central banks as they seek to revive growth and, in some cases, consider how to withdraw emergency financial support that has kept banks and economies afloat during the post-financial crisis years.
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