G7 Finance Chiefs Reaffirm Concerns on Forex Stability

Finance ministers and central bank governors from the Group of Seven (G7) countries have reiterated their stance on the potentially destabilising impact of excessive fluctuations in foreign exchange rates. Following their meeting in Washington, a joint statement emphasised the need for coordinated efforts to mitigate Iran’s involvement in activities that fuel regional instability.

The G7 gathering, held on the sidelines of the International Monetary Fund and World Bank spring meetings, included representatives from major industrial democracies such as Japan, Germany, and the United States. The ministers and governors condemned Iran’s recent attack on Israel in response to an earlier strike on its embassy compound in Damascus, characterising it as unprecedented.

Amidst discussions, the G7 members reaffirmed their exchange rate commitments outlined in 2017. This reaffirmation comes against the backdrop of significant currency movements, particularly the depreciation of the Japanese yen and other currencies against the U.S. dollar, propelled by robust economic growth in the United States and diminishing expectations of an imminent interest rate cut by the Federal Reserve.

The 2017 commitments underscored the G7’s dedication to market-determined exchange rates and emphasised the importance of consulting closely regarding actions in foreign exchange markets. The group acknowledged the potential adverse consequences of excessive volatility and disorderly movements in exchange rates on economic and financial stability.

Chaired by Italy, which currently holds the G7 presidency, the meeting centred on geopolitical risks affecting the global economic landscape, notably Russia’s ongoing conflict with Ukraine and escalating tensions in the Middle East. In response to these challenges, the G7 and the European Union pledged continued assistance to Ukraine to address its immediate financing needs.

Moreover, in an effort to hold Moscow accountable for the damage inflicted on Ukraine, the G7 countries committed to exploring avenues for utilising frozen Russian sovereign assets to aid the war-torn nation. They aim to reach a consensus on the utilisation of these assets by their summit in June, ensuring alignment with their respective legal frameworks and international law.