“The negotiators are working to advance agreement over currencies from the Gyeongju accord,” announced by finance chiefs last month, G-20 committee spokesman Kim Yoon Kyung told reporters in Seoul today. At the same time, they have so far failed to narrow differences on either exchange rates or the commitment to avoid sustained imbalances in trade and investment flows, he said.

The rancor follows a rejection by countries from China to Germany of any move to set a target for current-account surpluses or deficits as a percentage of gross domestic product. Narrowing differences would help quell currency tensions that risk sparking a wave of trade protectionism that might hobble the global economic recovery.

“Prospects for adding to the substantive agreement reached at the G-20 finance ministers’ meeting on Oct. 23 seem to be waning,” Aroop Chatterjee, a currency strategist at Barclays Capital in New York, wrote in a research note.

A meeting of finance ministers and central bankers last month agreed to move toward “more market-determined exchange rate systems” and “reducing excessive imbalances” assessed against “indicative guidelines to be agreed.”

Areas of Agreement

Negotiators are making progress on discussions over building a financial safety net and on development issues, Kim said. The G-20 groups the largest advanced and emerging-market economies, including the U.S., Germany, Japan, China, Brazil and India.

U.S. Treasury Secretary Timothy F. Geithner last month said that a 4 percent of GDP ratio was “likely to emerge as the basic benchmark countries look to.” He refrained from repeating that guideline at a gathering of finance ministers from the Asia-Pacific Economic Cooperation forum in Kyoto, Japan on Nov. 6.

Underlying a U.S. push to address the imbalances is the assessment by the Federal Reserve that a surfeit of Asian savings helped spark the credit boom earlier this decade, which ended in the biggest financial crisis since the 1930s. The meltdown gave rise to the first G-20 summit, in November, 2008.

Now, officials from Asia to Latin America counter it’s the American central bank’s liquidity injections that are warping global capital flows and driving down the dollar. The central bank of South Korea, the G-20’s host nation this year, today joined in that assessment of the Fed’s Nov. 3 decision to buy $600 billion of Treasuries, saying it will weaken the dollar.

Greenspan Proposal

Former Federal Reserve Chairman Alan Greenspan, writing in an opinion piece in the Financial Times today, said that both the U.S. and China are depressing their currencies, fueling the risk of protectionist moves that would harm global trade and economic growth.

Greenspan, who led the Fed from 1987 to 2006, urged the G-20 leaders to adopt limits for the accumulation of foreign- exchange reserves and “sterilization” of inflows of capital. China has accumulated the world’s largest reserves by limiting gains in the yuan.

Premier Wen Jiabao’s government has curbed the yuan’s advance to about 3 percent against the dollar since China pledged in June to allow greater flexibility. Still, authorities have allowed a faster pace of gains this week, a strengthening of 0.7 percent since Nov. 8, its biggest three-day advance since a currency peg ended in July 2005.

Leaders Gather

President Barack Obama, Chinese President Hu Jintao, German Chancellor Angela Merkel and other G-20 leaders are in Seoul for the two-day summit. In a letter to his G-20 counterparts released yesterday, Obama defended U.S. policy by arguing growth in his country is the “most important contribution” the U.S. can make to the global recovery and that its “fundamental strength” will ultimately determine the dollar’s value.

“The problem that we have today is that even the surplus countries, for example China and Germany, have completely different situations and two different reasons why they are in a surplus, just like we have different reasons why some countries are in a deficit in Europe or in the United States,” Angel Gurria, secretary-general of the Organization for Economic Cooperation and Development, told Bloomberg Television today. “These complexities will have to be tackled,” he said.

Brazilian Finance Minister Guido Mantega told reporters yesterday that the G-20 may discuss diluting the dollar’s role as a reserve currency to lessen its power in global markets. President-elect Dilma Rousseff reiterated that today and said a weak dollar is a problem for the world.

U.K. Chancellor of the Exchequer George Osborne rebutted that argument in a Bloomberg interview and pointed out that “it’s in the interest of everyone” that U.S. domestic demand rebounds and that the Fed is trying to deliver that.