Group of Seven calls for halt to dollar's rise

Group of Seven calls for halt to dollar's rise

BERLIN (AFP): The Group of Seven leading industrial nations
came down hard Saturday against further rise in the U.S. dollar
and hinted they would intervene on currency markets if the
volatility continued, in a text released by the seven
delegations.

"We reaffirmed our views that exchange rates should reflect
economic fundamentals and that excess volatility is undesirable,"
said the statement, which was read out verbatim by U.S. Treasury
Secretary Robert Rubin to reporters.

"We agreed to monitor developments in exchange markets and to
cooperate as appropriate," said the statement, also cited by the
other ministers at their separate press conferences.

The finance ministers and central bank governors made clear
that they viewed present exchange rates as correct, fixing a
previous imbalance.

"We believe that major misalignments in exchange markets noted
in our April 1995 communique have been corrected," the statement
said.

German Finance Minister Theo Waigel said "the orderly reversal
we wanted has taken place." This is the reversal that the G7,
which groups Britain, Canada, France, Germany, Italy, Japan and
the United States, had called for in April 1995, when a weak
dollar was helping U.S. exports but hurting European sales in the
American market.

French Finance Minister Jean Arthuis said: "We have reached an
unambiguous consensus today."

It was the first time in several years that the G7 finance
ministers have issued such a formal statement, clearly designed
to show the markets that the seven leading industrialized nations
are determined and united.

Japanese Finance Minister Hiroshi Mitsuzuka also told
reporters: "The strong yen has been corrected."

"I hope this will lead to a stable exchange market," he added.

He noted the exchange swings were hurting Japan, saying the
fall in the yen was "beginning to show up in rising import
prices."

Mitsuzuka said there was now "a higher probability of a
sustained recovery" in Japan -- a recovery the Japanese have said
could be destroyed by too weak a yen.

He said Japan has "abandoned the policy of growth through
external demand" in favor of a policy of domestic demand-led
growth."

Financial experts have said that Washington would help Japan
on stabilizing exchange rates only if Tokyo took moves that would
lead towards opening Japan up to imports.

Rubin said: "The Japanese continue to face an important
challenge in maintaining supportive macro-economic policy stands
necessary to promote a strong domestic demand-led recovery,
implementing structural reforms, open the Japanese economy and
policies to strengthen the banking system."

He added: "I think we all are going to have to watch very
carefully as the Japanese government works their way through
these very difficult issues and they clearly have difficult
issues to deal with.

The dollar was worth 1.6625 marks in late trading in New York
Friday, having risen over 20 percent since April 1995 and 10
percent over the past two months.

But the stronger dollar worries Japan since the yen has fallen
very sharply, to a four-year low at 123.2 yen to the dollar
Friday and Tokyo's problem is getting Japanese to purchase more
at home. A weak yen makes imports more expensive.

Eddie George, governor of the Bank of England, explained that
the G7 does not have precise targets for exchange rates.
Referring to the final statement, he said: "These are broad brush
judgements. The approach in the G7 is not to be precise" about
rates.

Hashimoto -- Page 9