Japan, eurozone ministers seek G7 message on forex

Japanese and eurozone finance ministers called for G7 finance leaders meeting next week to seek a curb on excessive exchange-rate movements, amid growing concern over the economic effects of a sliding dollar.

"It is important for the G7 members to confirm their shared understanding that excessive foreign exchange rate moves are undesirable for economic growth," Japanese Finance Minister Fukushiro Nukaga told reporters yesterday, when asked whether the dollar's broad downtrend would be discussed at the G7 meeting.

The dollar tumbled to an all-time low of 1.59 per euro and to a 13-year low below 96 yen last month on fears the US economy, battered by an ailing housing market and a deeply wounded banking sector, would enter a recession.

It has bounced back somewhat to around 1.5655 to the euro and 102.35 against the yen yesterday, but has still fallen nearly six per cent on a trade-weighted basis in the past month - raising fears in Europe and Japan that businesses will lose out to cheaper rivals trading in US dollars.

"Our concern is well-known, we don't like excessive volatility and disorderly rate moves, they are harming worldwide economic growth and we will stick to that line," Eurogroup chief Jean-Claude Juncker told reporters late on Thursday.

Ministers from the 15 countries using the euro and the European Central Bank, or the Eurogroup, are meeting in the town of Brdo, close to Ljubljana, to discuss the economy at a regular meeting and agree on their call to Group of Seven rich economies, which meet next Friday in Washington.

Mr Nukaga said the G7 finance ministers and central bankers needed to communicate closely to stabilise financial markets at a time global economic growth appears to be slowing.

The G7 has said in past meeting communiques that excess volatility and disorderly movements in exchange rates were undesirable.

Markets watch communique wording on exchange rates closely, because all G7 members agree on the phrasing, so it could give the first signal of a deal on concerted action in foreign exchange markets.

European countries have been vocal in expressing concern over the euro's sharp rises against the dollar as such moves would hurt the competitive advantage of the region's exports.

French Economy Minister Christine Lagarde said on Thursday that the current situation in the currency market was "painful" for eurozone economies.

Japan's growth also relies heavily on exporters, with Sony Corp, the maker of PlayStation game machines, saying on Thursday that each one yen rise against the US dollar cost the company about $59 million.