Forex rate adjustments best left to sovereign governments: Pranab

Underlining that currency rates should be driven by market forces “as far as possible”, Finance Minister Pranab Mukherjee said “the best course would be to leave it to sovereign governments to decide what course of action they will take. We take that position”.

Mukherjee’s comments at the G20 Finance Ministers’ meeting here comes against backdrop of the US pressurising China to revalue its currency yuan.

“At the same time every country has its own problems and they will have to address those issues. You cannot sit on value judgement from outside,” Mukherjee said. His remarks quashes speculations that India might join Brazil and the US to pressurise China to revalue yuan.

The foreign exchange value of yuan is not determined by market forces. It is alleged that an undervalued yuan leading to global trade imbalances as Chinese exports are becoming cheaper. Peterson Institute for International Economics Director Fred Bergsten estimates that a 20-40 per cent appreciation of yuan would result in a $100-150 billion improvement in the US trade deficit and would generate 7,00,000 to 1 million jobs in the US.

Recently, a new legislation was introduced in the US Senate providing additional tools for the administration to address currency manipulations by countries such as China. The proposed law would ensure the Federal government is equipped to respond on behalf of American workers and manufacturers by imposing countervailing duties on subsidised exports.