BASEL, Switzerland, Jan 12 - Central bankers from the world's richest nations gather on Monday to discuss the impact of the U.S. dollar's dramatic fall on the global economy, which some Europeans warn could stifle recovery. The Parmalat corporate scandal and sweeping bank regulatory changes known as Basel 2 are on the agenda. Central bankers opened the discussions with leading global commercial bankers on the eve of the Group of 10 meeting. Getting any agreement that the dollar's drop, which has pushed the euro up around 12 percent in the past two months alone and could unsettle growth, may prove difficult. Bank of Canada Governor David Dodge told reporters that so far the rapid currency adjustments have been taken in stride. "Markets have been volatile but...it has been orderly," Dodge said. Chinese Central Bank Governor Zhou Xiaochuan also said upward pressure on his currency, the yuan which is pegged to the U.S. dollar, is much weaker now, suggesting he is under less immediate need to change foreign exchange policy. The United States is lobbying China hard to revalue its currency, which U.S. manufacturers say is robbing them of jobs. Asian countries' market intervention to weaken their currencies has also contributed to the euro's steep rise. "As trade balance changes, the economic situation changes, and the U.S. economy picks up very quickly, it seems things are changing. (Upward pressure on the yuan) is much weaker," Zhou told reporters.
BIG AGENDA
Reaching a common understanding among central bankers on developments in foreign exchange markets would lay important groundwork ahead of the Group of Seven session of finance ministers and central bankers from top industrialised nations who meet on February 7 in Florida. ECB President Jean-Claude Trichet became the first top central banker to raise the warning flag on the dollar's decline when he said last week that excessive currency movements are unwelcome. Leaders in France, Germany and Belgium also say it could choke off growth in the world's second largest economic region. Trichet, who is also chairman of the G10 central bankers group, declined comment on Sunday as he arrived for meetings, as did U.S. Federal Reserve Chairman Alan Greenspan. Trichet holds a news conference around 1100 GMT on Monday. One central banker said any currency discussion at meeetings on Sunday focused largely on technical issues, not on risks to global economic output. Another said the Basel 2 accord, due to be finalised by end-June with sweeping consequences for the banking sector, was also on the agenda. The Basel Committee on Banking Supervision meets on Wednesday at the BIS to hammer out final changes to the accord. Private sessions also were held at the BIS with commercial bankers, including executives from BNP Paribas , BBVA , Commerzbank and Citigroup . But they refused to discuss the nature or purpose of the discussions. Some of the world's biggest banks including Deutsche Bank and Bank of America have been quizzed by regulators concerned about their role in scandal-ridden Italian food group Parmalat.//