World stocks rose and the dollar slumped Monday after global finance chiefs vowed to avoid a currency war that could derail the global recovery. With no concrete guidelines to go by, however, investors are wary that this may only prove a temporary truce.
Finance ministers from the Group of 20 developed and emerging countries promised to avoid competitive devaluations - weakening a national currency to help exports and sustain economic recovery - but offered no binding targets for evening out trade imbalances, The Associated Press reports.
The dollar slid against 15 of its 16 major counterparts as investors added to bets that an increase of the Fed's quantitative-easing plan will boost higher-yielding assets. Australia's dollar advanced to within one U.S. cent of parity with the U.S. currency after producer prices rose faster than economists estimated. Sweden's krona gained before the central bank says tomorrow whether it plans to raise interest rates.
"It's very much a case of ‘risk-on' and dollar weakness," said Henrik Gullberg, a London-based currency strategist at Deutsche Bank AG. "We will probably see a situation where everybody will try to weaken their currencies, and in the U.S., that means more QE," according to Bloomberg.