Group of 20 finance chiefs stood by a two-year pledge not toresort to currency devaluations to spur economic expansion,signaling ease with the dollar's recent surge and declines in theeuro and the yen.

“We will stick to our previous exchange rate commitments andwill resist protectionism,” the G-20s finance ministers and centralbankers said in a statement after the talks ended.

Divergences in international growth rates and monetary policiesare propelling the dollar higher against other currencies. That'salready eating into the earnings of companies such as Pfizer Inc.,threatening to curb the U.S. economic expansion and starting todraw grumbles from U.S. lawmakers.

U.S. Treasury Secretary Jacob J. Lew used the talks to remindhis G-20 counterparts not to use exchange rates to boost exports,according to a U.S. official. Another official, who also asked notto be identified because the talks are private, advised governmentsagainst relying too much on monetary policy to stimulatedemand.

For much of the past two years, G-20 finance chiefs have blessedeasier monetary policies so long as they're focused on liftingdemand at home rather than stealing it from elsewhere. They'veforsworn targeting “exchange rates for competitive purposes,” suchas by publicly calling for them to fall.

There's an agreement “for each part of the global economy to usethe levers that are available to create sustainable growth,” Lewsaid after the meeting. “It's fundamentally necessary for all ofthe different parts of the global economy to have greaterstrength.”

The G-20 officials vowed to bolster a global economy whosegrowth they said remains uneven. Monetary policy needs to remainaccommodative in some economies, and those looking to pull backshould communicate their intentions to avoid disrupting othermarkets, they said.

A mounting concern among investors is that a currency war willstart, as nations which have run out of policy ammunition activelyseek to drive down their exchange rates to lift growth andinflation. Those losing out in global trade could then retaliate,sparking a 1930s-style round of devaluations that roils financialmarkets, derails trade, and hurts the world economy.

President Barack Obama's administration has so far resistedcomplaining about a stronger dollar, which has climbed 16 percenton a trade-weighted basis over the past year.

Foreign-exchange markets have been shaken this year as more thana dozen central banks cut interest rates and the European CentralBank (ECB) announced a 1.14 trillion-euro (US$1.29 trillion)asset-purchase program. The Bank of Japan also increased itsbond-buying at the end of last year, and the People's Bank of Chinalast week reduced the amount of cash lenders must hold asreserves.

The Federal Reserve is heading in the opposite direction,signaling it may soon raise interest rates for the first time since 2006 as the U.S.expansion firms and hiring accelerates in the world's biggesteconomy.

No Targeting

“Sometimes an accommodative monetary policy might be interpretedas currency manipulation, but it might not be anything of thekind,” Canadian Finance Minister Joe Oliver said in an interview inIstanbul. “It might just be a response to the domestic economicsituation.”

The G-20 statement said the ECB's stimulus will support recoveryin the euro area and help it fulfill its inflation goal.

Nobel laureate Paul Krugman and billionaire investor WarrenBuffett both said last week that the rising dollar could impedeU.S. growth, and American companies from Pfizer to Procter &Gamble Co. have said their earnings have already been pinched byit.

G-20 officials said on Monday that recent exchange-ratefluctuations merely mirror diverging economic fortunes as the U.S.gathers strength and the euro area and Japan remain weak.

“The big currencies are realigning to better reflectfundamentals,” Italian Finance Minister Pier Carlo Padoan said inan interview.

Any foreign concern about a falling euro seems “like a verymercantilist way of seeing things,” Bank of Italy Governor IgnazioVisco told reporters. Bank of France Governor Christian Noyer saidfluctuations of major currencies are in “normal” range.

The U.S.'s room to criticize is limited by the fact that the Fedconducted three rounds of quantitative easing between 2008 and latelast year, contributing to a weaker dollar. The U.S. has alsolobbied other countries to do more to lift their growth rates.

In a sign American lawmakers may be growing more frustrated withthe dollar's rise, a group of senators will this week announcelegislation aimed at punishing countries which manipulate theirexchange rates.

–With assistance from Simon Kennedy in London.

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