At a meeting in South Korea over the weekend, the G-20 finance ministers promised to avoid weakening currencies to lift exports. They agreed to try to reduce trade imbalances, but stopped short of setting specific targets, as had been proposed by the U.S., Bloomberg reported.
In a surprise move, however, the finance chiefs also vowed to give emerging nations a bigger voice in the International Monetary Fund, recognizing the quickening shift in economic power away from Western industrial nations, Reuters reported.
The ministers forswore "competitive devaluation" to calm recent fears of an emerging currency and trade war stemming from using cheaper currencies to spur growth, but they failed to agree on a U.S. proposal for targets that was aimed to pressure China to allow faster gains in the yuan. That decision was left up to the G-20 leaders, which are meeting in Seoul next month.
The outcome of the meeting was continued sell-off in the dollar with investors continuing to expect further Federal Reserve quantitative easing as early as next week when the Fed meets. The dollar slid Monday, dropping to a 15-year low against the yen, sinking as far as 80.66 yen. Against the euro, the dollar dropped 0.8% to $1.4070 as of 8:08 a.m. in London.
As the dollar fell, gold and other commodities rallied. Equities, too, were higher in Europe and futures indicated a higher open in the U.S., as investors expected higher emerging markets currencies, which triggered flows into emerging markets.