WASHINGTON (Reuters) - Finance chiefs from the Group of Seven rich nations on Friday urged China to let its yuan currency appreciate more quickly but opted not to single out the dollar, euro or yen in its post-meeting communique.
The language echoed but advanced earlier G7 calls for China to let the tightly controlled yuan float more freely.
Before the meeting, some European countries wanted the G7 to focus on dollar weakness, as policy-makers fear its slide against the euro will hurt exports and the euro zone economy.
The euro this week surged to an all-time peak against the dollar above $1.43, the latest in a string of record-setting moves. It has gained about 8 percent so far this year.
But unlike the dollar, the euro has also gained against China's yuan, a move that has swelled the euro zone trade deficit with China and put pressure on European exporters.
China dropped its dollar peg in July 2005, adopting instead a peg to a basket of currencies, but the basket remains heavily dollar-weighted.
Below is a compendium of what was said, followed by details from the April G7 meeting in Washington:
G7 COMMUNIQUE ON CURRENCIES, OCT. 19, 2007:
"We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange rate markets closely, and cooperate as appropriate. We welcome China's decision to increase the flexibility of its currency, but in view of its rising current account surplus and domestic inflation, we stress its need to allow an accelerated appreciation of its effective exchange rate."
U.S. TREASURY SECRETARY HENRY PAULSON:
On U.S. strong dollar policy
"I was very clear -- and it didn't surprise anyone because I've always been clear on this with my colleagues -- that I believe a strong dollar is in our nation's interest and believe that currency values should be determined based upon underlying economic fundamentals in a competitive marketplace"
On China's comments about the need for structural reform
"We welcome the fact that they think flexibility is a good thing and we just are encouraging them to move a bit quicker and it sounds like they agree."
FRENCH ECONOMY MINISTER CHRISTINE LAGARDE:
On the communique's mention of the yuan
"It was a notable variation ... I am happy that in this G7 communique there is a specific paragraph on the yuan to ask for an accelerated appreciation of the yuan ... against other currencies, notably against the euro. It is important for us.
"I hope the financial markets will hear this."
On U.S. dollar policy
"We were reassured by the comments made by the U.S. authorities, by the U.S. Treasury Secretary and by the chairman of the Fed."
EUROGROUP HEAD JEAN-CLAUDE JUNCKER:
On foreign exchange
"We will continue to monitor exchange rate markets closely, particularly in light of recent moves."
On the yen
"It should be noted that the Bank of Japan believes Japan's economy is on a substantial path of recovery and that exchange rates should reflect this economic progress."
JAPANESE FINANCE MINISTER FUKUSHIRO NUKAGA:
On foreign exchange
"We shared the view again that it is desirable to recognize risks of one-way bets in various markets, especially in the currency market."
Asked what he told the G7 on the yen, Nukaga said: "I just said that the yen should surely reflect Japan's economic fundamentals."
"The expression in the statement has changed and I don't think its appropriate to comment further on that."
JAPANESE MINISTRY OF FINANCE OFFICIAL:
"Japan is always saying the yen should reflect Japan's fundamentals, it is not a change in stance."
ITALIAN FINANCE MINISTER TOMASSO PADOA-SCHIOPPA:
"Europe is a region that has a strong currency and needs to learn to live with the fact."
BANK OF CANADA GOVERNOR DAVID DODGE:
On foreign exchange
"We have been getting adjustment in the United States and indeed, its appropriate that we've had U.S. dollar depreciation. The problem is that it really has been Europe and Canada that have been the main focus of that and we haven't had the Asian countries -- and those Asian countries as a whole have not done as much adjustment as will be required going forward. Our view is and has been that currency adjustment is part of that."
On Asian domestic demand
"Over time it's quite clear the Asian countries as a whole - and clearly China and Japan are at the heart of that -- there is going to have to be more domestic absorption, stronger domestic demand in those countries to offset the weakening domestic demand in the United States."
"We've been saying that for almost as many years as I've been coming here as governor and so we are going to need more of that."
"They (the Chinese) are engaged in a Party congress right now so I'm sure they're doing other things than precisely looking at the communique we wrote this afternoon."
DEPUTY GOVERNOR OF THE PEOPLE'S BANK OF CHINA WU XIAOLING:
Speaking at a conference in Washington on Friday, Wu said "to solely adjust the exchange rate in the absence of restructuring policies will hurt the real economy and global growth."
She said China is moving toward more flexible exchange rates but at a gradual pace and as part of a broader menu of economic reforms but acknowledged that some people in the United States "are not as patient as we are."
On China's surplus
"Some of the surplus of China has been transferred from other countries, especially Southeast Asia."
FOREIGN EXCHANGE MARKET ACTION:
The dollar sank to fresh lows when it became clear the G7 would not directly mention the greenback's weakness. Against a basket of major currencies, the dollar fell to its lowest level since the free-floating exchange rate regime was established in the early 1970s.
Traders also pushed the dollar to a three-week low against the yen. It held near a record low against the euro.
WASHINGTON, APRIL 13, 2007, G7 COMMUNIQUE:
"We reaffirm that exchange rates should reflect economic fundamentals. Excess volatility and disorderly movements in exchange rates are undesirable for economic growth. We continue to monitor exchange markets closely, and cooperate as appropriate. In emerging economies with large and growing current account surpluses, especially China, it is desirable that their effective exchange rates move so that necessary adjustments will occur."