The G20 summit has been pitched as a chance for leaders of the countries that account for 85 percent of world output to prevent a currency row escalating into a rush to protectionism that could imperil the global recovery.
But there is little sign of consensus.
The summit has been overshadowed by disagreements over the U.S. Federal Reserve's quantitative easing (QE) policy under which it will print money to buy $600 billion of government bonds. The move could depress the dollar and cause a destabilising flow of money into emerging economies.
"I will say that the Fed's mandate, my mandate, is to grow our economy. And that's not just good for the United States, that's good for the world as a whole," Obama said during a trip to India. "The worst thing that could happen to the world economy, not just ours, is if we end up being stuck with no growth or very limited growth."
European Central Bank President Jean-Claude Trichet said all participants at a meeting of the world's central bankers in Basel, Switzerland had insisted they were not pursuing weak currency policies.
"We're attached to avoiding excessive volatility. It's very counterproductive for global growth and global stability," he told a news conference.
The head of the World Bank suggested large economies consider gold as an indicator to help set exchange rates. The proposal was aimed at sparking broader debate that goes beyond talk of currency devaluation wars.
China, Russia Attack Fed Move
Washington has frequently criticised China, saying it deliberately undervalues its currency to boost exports.
China says the United States, via the Fed, is engaged in the same thing that it stands accused of. Some emerging nations have already acted to curb their currencies' rise.
Resentment abroad stems from worry that Fed pump-priming will hasten the U.S. dollar's slide and cause their currencies to shoot up in value, setting the stage for asset bubbles and making a future burst of inflation more likely.
"As a major reserve currency issuer, for the United States to launch a second round of quantitative easing at this time, we feel that it did not recognise its responsibility to stabilise global markets and did not think about the impact of excessive liquidity on emerging markets," Chinese Finance Vice Minister Zhu Guangyao said.
The Fed's quantitative easing policy was unveiled last week to jeers from emerging market powerhouses from Latin America to Asia. Russia renewed its assault on Monday.
"Russia's president will insist .... that such actions are taken with preliminary consultations with other members of the global economy," said Arkady Dvorkovich, a Russian official who is preparing the country's position in Seoul.
Fed officials sounded differing notes on the program, one arguing it was a good way to fight deflation, another warning it might need to be curbed.
Sarah Palin, a prospective 2012 Republican presidential candidate, suggested the Fed "cease and desist" from the program or risk permanently higher inflation.
The Bank of Japan said it too was ready to boost asset-buying if it saw clear signs of a downturn. Worth 5 trillion yen ($62 billion), it is so far just a tenth the size of the Fed's.
US Drops Key Demand
The U.S. has already all but dropped its centrepiece proposal for the G20 -- a measure that would cap current account balances at 4 percent of gross domestic product, something economists said was clearly aimed at China.
U.S. Treasury Secretary Timothy Geithner backed away from the numerical target that had been rejected by China, Germany, Japan and others in a sign that global financial power had slipped from U.S. hands.
"Judging by the critical response of emerging market governments to QE, the likelihood of a ceasefire in the currency war is slim," RBC Capital markets said in a report. (Reuters)
