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French leaders call for better foreign exchange coordination

FRANCE made a push for better international foreign exchange coordination yesterday and said there was a need for more stability between the major currencies.

The comments from Economy Minister Christine Lagarde and Bank of France Governor Christian Noyer come ahead of a meeting of G8 leaders in Italy this week.

"We should explore a better coordination of foreign exchange policies which would raise the question over the medium term of the balance of exchange rates and the role of currencies that have changed both as a result of the crisis and the role played by emerging market countries," Lagarde said in response to a question about the G8 meeting.

Noyer said there was a need for a stable and international currency to avoid a return to protectionism.

"When you see the development of international swaps made in currencies which are neither convertible nor transferable, in a certain way that means you are returning to bilateralism in commercial exchanges," said Noyer, who is also a governing council member of the European Central Bank. "We must be really careful about that and maybe we need to make sure there is a greater stability between the big currencies in the period to come."

He also said one lesson from the financial crisis was that accumulating foreign exchange reserves was not necessarily positive.

"We must avoid a return to the accumulation of foreign exchange," he said. "That means that in order to compensate a lower accumulation of foreign exchange reserves we need ways to finance world activity, world trade; that's why we need to reinforce the resources of the IMF."

Asian Development Bank President Haruhiko Kuroda also said it was important that global imbalances be unwound gradually.


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