G8 finance ministers want curbs on commodity speculation

By Jo Winterbottom

LECCE, Italy (Reuters) - Finance ministers of the Group of Eight nations made little mention of currencies or bond yields as they ended their meeting on Saturday, but there was clear evidence of disquiet over oil and commodity prices.

French Economy Minister Christine Lagarde said ministers wanted measures to curb volatility in oil and oil products markets, where prices have climbed sharply this year as investors bet signs of an economic rebound will spark demand.

"We asked the IMF (International Monetary Fund) and IOSCO (International Organization of Securities Commissions) to work with the IEA (International Energy Agency) to propose at least methods of surveillance and maybe of regulation concerning the oil markets," Lagarde told reporters after the meeting.

She added that G8 ministers wanted "proposals...made to producing and consuming countries to avoid extreme volatility like that which we saw a year ago."

The finance ministers from G8 countries -- Canada, France, Germany, Italy, Japan, Russia, Britain and the United States -- said volatile commodity prices put at risk growing signs that their economies were heading toward recovery.

"Excess volatility of commodity prices poses risks to growth," the ministers said in their final statement.

"We will consider ways to improve the functioning and transparency of global commodity markets.

FEWER CURRENCY WORRIES

Ministers have appeared less concerned about currency movements in recent months than they were last year, when Western policymakers described exchange rates for the yen and China's yuan as key to righting global imbalances.

At the meeting, both German Finance Minister Peer Steinbrueck and IMF chief Dominique Strauss-Kahn played down the dollar's weakness against major currencies since March.

Steinbrueck said he was impressed by the degree to which the German economy was not being affected by the strength of the euro against the dollar.

"I don't see the dollar as being weak, I think the dollar has been today correctly valued by the market," Strauss-Kahn said.

"We see a dollar which today is stronger than one year ago...so I don't see today a weak dollar and I don't forecast that we would have to expect many changes in the coming time."

But Italian Economy Minister Giulio Tremonti said the return of speculation to markets was unwelcome, and made clear that he was especially worried by commodity markets.

"Speculation is coming back, a certain type of finance is raising its head again and doing the same not very nice things it was doing until last summer," he told reporters after the meeting.

"Concern about this came...from everybody. There is a return of speculation on derivative and commodity markets."

Since the end of February, tin prices are up 35 percent while corn, wheat and soybean prices are up about 25 percent. Crude oil prices have jumped nearly 75 percent.

Finance minister Alexei Kudrin of Russia, a major oil producer, told reporters at the meeting that it was too soon to talk about stabilization of oil prices. He said Russia would review its oil price forecasts for its 2009 and 2010 budgets in August this year.