Exchange rates must not shape trade flow

Washington: Countries should not use currency intervention as a part of trade policy, and should allow economic fundamentals to dictate exchange rates, said Duvvuri Subbarao, governor of India's central bank.

"Letting exchange rates remain aligned with economic fundamentals, and an agreement that currency interventions should not be resorted to as an instrument of trade policy should be central to a coordinated approach at a multilateral level," Subbarao, who is chief of the Reserve Bank of India, said in the text of a speech to the International Monetary and Financial Committee in Washington.

The comments are part of a weekend of meetings during which Group of 20 nations officials outlined methods to decide when indicators, including budget deficits and external trade balances, appear excessive. India is among the seven countries targeted for further study.

The global recovery may be "jeopardised" by a sustained rise in oil prices, and food-supply constraints are also causing volatility in prices, Subbarao said in a separate statement to the IMFC, the steering committee of the IMF.