G7 'should target Asian currencies'

POLICYMAKERS from the Group of Seven (G7) leading industrial economies could endorse an even softer dollar this week, but signal a demand for stronger Asian currencies, so far relatively untouched by the greenback's decline.

G7 ministers gathering in Florida for two days from Friday will come under intense scrutiny after their meeting last September, when calls for more-flexible exchange rates triggered a slump in the dollar.

The decline was regarded as an effective way of helping to rein in the bulging US current account deficit by making US exports cheaper. But the bulk of the adjustment has so far fallen on the euro, pound and yen, with most other Asian units little moved.

'We expect the G7 to repeat its support for currency flexibility, possibly with a greater focus on non-G7 economies,' said Goldman Sachs analyst Dominic Wilson.

'The burden of adjustment from the falling dollar has not been well distributed or well aligned with the current account shifts that need to occur.'

The G7 groups the US, Japan, Germany, Britain, France, Italy and Canada. Russia and China usually send representatives to the body, which aims to coordinate global economic policy to boost stability and growth.

Since the last G7 meeting in Dubai, the yen has gained about 7% against the dollar despite interventions by Tokyo to cap its rise. The euro is up by about 10%, while sterling has climbed to a series of 12-year highs.