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

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

Divergences in international growth rates and monetary policies are propelling the dollar higher against other currencies. That’s already eating into the earnings of companies such as Pfizer Inc., threatening to curb the U.S. economic expansion and starting to draw grumbles from U.S. lawmakers.

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

For much of the past two years, G-20 finance chiefs have blessed easier monetary policies so long as they’re focused on lifting demand at home rather than stealing it from elsewhere. They’ve forsworn targeting “exchange rates for competitive purposes,” such as by publicly calling for them to fall.

There’s an agreement “for each part of the global economy to use the levers that are available to create sustainable growth,” Lew said after the meeting. “It’s fundamentally necessary for all of the different parts of the global economy to have greater strength.”

The G-20 officials vowed to bolster a global economy whose growth they said remains uneven. Monetary policy needs to remain accommodative in some economies, and those looking to pull back should communicate their intentions to avoid disrupting other markets, they said.

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

President Barack Obama’s administration has so far resisted complaining about a stronger dollar, which has climbed 16 percent on a trade-weighted basis over the past year.

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

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 biggest economy.


No Targeting

“Sometimes an accommodative monetary policy might be interpreted as currency manipulation, but it might not be anything of the kind,” Canadian Finance Minister Joe Oliver said in an interview in Istanbul. “It might just be a response to the domestic economic situation.”

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

Nobel laureate Paul Krugman and billionaire investor Warren Buffett both said last week that the rising dollar could impede U.S. growth, and American companies from Pfizer to Procter & Gamble Co. have said their earnings have already been pinched by it.

G-20 officials said on Monday that recent exchange-rate fluctuations 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 reflect fundamentals,” Italian Finance Minister Pier Carlo Padoan said in an interview.

Any foreign concern about a falling euro seems “like a very mercantilist way of seeing things,” Bank of Italy Governor Ignazio Visco told reporters. Bank of France Governor Christian Noyer said fluctuations of major currencies are in “normal” range.

The U.S.’s room to criticize is limited by the fact that the Fed conducted three rounds of quantitative easing between 2008 and late last year, contributing to a weaker dollar. The U.S. has also lobbied other countries to do more to lift their growth rates.

In a sign American lawmakers may be growing more frustrated with the dollar’s rise, a group of senators will this week announce legislation aimed at punishing countries which manipulate their exchange rates.


–With assistance from Simon Kennedy in London.

Copyright 2018 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.