France will use its presidency of the Group of 20 major world economies next year to work for a global currency system that relates exchange rates to purchasing power, the country's markets regulator said on Friday.
In an interview with Reuters, Jean-Pierre Jouyet said the United States and Japan could share with France an interest in creating some sort of international monetary system despite Washington's commitment to exchange rates being set by markets.
"At the heart of the G20 will be the monetary challenge -- how do you move from a G7-G8 world to a G20 in terms of exchange rate regulation," said Jouyet, a former head of the French Treasury and junior minister for European affairs.
"Apart from the French, those who believe in it when it's in their interest are the Americans," he said.
Japan too had a record of using currency market intervention to keep the yen competitive, he said.
Coordinated action to realign major world currencies last occurred a decade ago when the U.S., European and Japanese central banks intervened to stop the euro's decline after the single European currency fell to a record low of 82.25 cents in October 2000, the year after its launch.
The euro now stands at around $1.25 after hitting a peak of $1.6038 in July 2008.
France has long favored a managed currency to keep its exports of aircraft and farm produce competitive. But for most U.S., British and German policymakers, it is an article of faith that markets should determine exchange rates freely.
However, Jouyet said U.S. President Barack Obama would need relative exchange rate stability to achieve his economic competitiveness and growth objectives in the second half of his term.
SNAKE OR BASKET
The head of the French Markets Authority said the G20 could consider some version of the European Union's monetary "snake" system, in which currencies were allowed to fluctuate within bands, or China's idea of a reserve currency based on a basket of major currencies.
"On the one side, you need to see what the parities are compared to fundamentals, to purchasing power... On the other side, the question that arises is how monetary exchanges are organized in a new G20 world," Jouyet said.
China would need to be convinced, but had shown it was responsive to international concerns about the yuan by allowing its exchange rate to rise slightly since last month.
Jouyet said President Nicolas Sarkozy had the political energy to give new momentum to the G20, which became the key global economic leadership forum at the height of the financial crisis in November 2008 when it began holding regular summits.
Sarkozy said last year he wanted the major industrial and emerging nations to discuss a "multi-monetary" international currency system rather than one based on the dollar.
Jouyet said the challenge was to get the major emerging economies -- China, India, Brazil and South Africa -- to engage more actively in economic policy cooperation rather than just basking in their new-found status at the top table.
"The G20 is an enlargement of the G8 to include the big emerging countries. They are the most silent, and it is their indifference and refusal to engage that seems to me most worrying," Jouyet said. "We have given them the political recognition but we haven't had the operational payback."
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