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Firm Currency Rate Urged to Protect World Economy

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From Reuters

Stabilizing exchange rates between major world currencies will permit leveling off of interest rates since inflationary pressures do not seem to be increasing, French Finance Minister Pierre Beregovoy said today.

Finance ministers of the Group of Seven--the United States, West Germany, Japan, France, Britain, Italy and Canada--met Thursday and today to discuss the state of the world economy and the external debt of middle-income developing countries, such as those of Latin America.

The rising dollar, upward pressures on interest rates and trade imbalances between surplus countries such as West Germany and Japan and deficit countries such as the United States, are at the top of the agenda, Beregovoy told a news conference.

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“Cooperation between the industrial countries needs to be strengthened” to stabilize exchange rates, the minister said. “If exchange rates stabilize, interest rates may start leveling off and fall.”

Levels of long-term interest rates are satisfactory, Beregovoy said. “But there is pressure on short-term rates,” which are on the rise.

The minister refused to discuss what exchange rates would be acceptable to the G-7. Asked how the group would react to a rising dollar on the currency markets, he answered, “secrecy is the best response.”

“We should not tell the markets in advance what our reaction would be,” he added.

The G-7 meetings also are examining ways of alleviating the debt of the developing countries.

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