By PAN PYLAS and DON MELVIN
BRUSSELS (AP) â¿¿ The recent swings in the foreign exchange markets and the dangers of the export-sapping rise in the value of the euro were being debated at a meeting of European finance ministers Tuesday ahead of a gathering of the world's leading industrial and developing economies.
Exchange rates and the threat of a "currency war" are expected to feature heavily at the Group of 20 meeting of finance chiefs in Moscow on Feb. 15-16. There have been fears voiced across Europe recently that the rise in the value of the euro against other currencies, such as Japan's yen, would make the region's exports more expensive and thereby hold back any economic recovery.
However, in an attempt to calm these concerns, the Group of Seven leading industrial nations â¿¿ which includes the United States, Japan as well as Europe's France, Germany and Italy â¿¿ issued a statement affirming their commitment to exchange rates determined by the markets and not government policy.
"We are agreed that excessive volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability," the G-7 said in a statement Tuesday published on the Bank of England website. "We will continue to consult closely on exchange markets and cooperate as appropriate."
Much of the recent volatility in foreign exchange markets has been a by-product of developments affecting the Japanese yen, which dropped Monday to its lowest against the dollar since May 2010. Though the Japanese government has not directly intervened to get the value of the yen down, it has set in motion a series of economic policies, such as a higher 2 percent target for Japanese inflation that many in the markets think will lead to more money being created in Japan.
One parallel effect of that policy has been a rise in the euro. It is now trading consistently above the $1.30 mark that many politicians and businesses think is fair-value. A higher exchange rate makes life potentially more difficult for exporters and may hold back economic recovery in the 17 European Union countries that use the euro. Figures later this week will likely confirm that the eurozone economy remained in recession in the final three months of 2012.