Group of 20 finance chiefs are planning to disavow competitive devaluations in a statement to be released after talks end in Moscow tomorrow, according to an official from a G-20 nation.

The latest draft of the group's communique doesn't repeat this week's pledge by the Group of Seven to avoid using exchange rates as a goal of policy, said the official, who asked not to be identified because the document isn't public. It will instead echo language adopted by the G-20 in November, which urges currencies to be set by financial markets.

The G-20's finance ministers and central bankers are trying to find common ground after the G-7 this week sought to avoid a so-called currency war by uniting around a commitment not to target exchange rates -- only to then divide over whether the statement signaled irritation with Japan.

"All members of the G-20 need to deliver on the commitment to move towards market-determined exchange rates," U.S. Treasury Undersecretary Lael Brainard said at a conference in Moscow today. "G-20 members will have to bring their exchange frameworks into alignment so that we grow together and avoid a downward spiral of beggar thy neighbor policies."

Bank of Japan Governor Masaaki Shirakawa today defended his nation's economic strategy, arguing it is aimed at beating 15 years of deflation and not at driving down the yen.

David Fuller's view While we have yet to see G-20's final statement on currency devaluations, which is scheduled for release tomorrow, the preliminary discussions suggest that it will be somewhat opaque and therefore subject to interpretation. If so, it would offer enough wiggle room to avoid condemnation of devaluations seen within G-20 in recent years.

That would be the best result in a difficult situation, in my opinion. While Japan's trade rivals will not be happy with the yen's sharp decline since Shinzo Abe became Prime Minister, they will at least recognise that the global economy will be somewhat stronger if Japan is able to pull out of its slow motion deflationary spiral, which has considerably weakened its economy over the last 22 years.

Also, while G-20 obviously cannot promote devaluation, it would be disingenuous if its member states were to condemn Japan. After all, most of them have helped their currencies to drift lower in recent years, not least because they fear deflation more than inflation.

Interestingly, outgoing BoJ Governor Masaaki Shirakawa, in his G-20 comments within the article above, has supported rather than distanced himself from Shinzo Abe's policies. This is to his credit, in my opinion, and I have often been critical of Mr Shirakawa's previous monetary policy decisions.