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The pressure is on the world's economic powers to negotiate a deal that will avert an all-out currency war amid wild fluctuations in global currency markets.

As the Canadian dollar hit parity with the U.S. greenback and the Japanese yen struck a 15-year high, a senior South Korean official said the currency upheaval - and the need to calm it down - has become the dominant issue for upcoming G20 meetings in his country.

In an interview with The Globe and Mail, South Korea's ambassador to Canada warned that the credibility of the Group of 20 developed and emerging economies hangs on whether they can reach a new arrangement on exchange rates at fall meetings that begin next week.

Currency movements have become a pressing concern in recent months as the evidence mounts that economic growth is slowing in troubled developed economies. In the United States, growth is so slow that it has proven impossible to bring down the unemployment rate, which stood at 9.6 per cent in December. There are nearly 15 million unemployed people in the U.S., and more than 6 million of those have been out of work for at least six months.

A prolonged period of ultra-low interest rates, and massive deficit spending in most of the world's biggest economies, has not been enough to stoke strong global growth. So some governments are now turning to one of the only tools they've got left - trying to devalue their currency, or at least keep it from going up, in order to make their exports more competitive.

That has caused some figures, most notably Brazilian Finance Minister Guido Mantega, to warn of the threat of an all-out currency war. Defusing such a battle wasn't on the original G20 agenda as South Korea prepared to host, but it has shot to the top of the list since the organization last met formally in June in Toronto.

Finance ministers and central bankers of the G20 gather in Gyeonju late next week to take another crack at the currency dispute, after failing to resolve their differences last week in Washington at a meeting of the International Monetary Fund.

South Korea is well-placed to guide a debate that is largely focused on a disagreement between the world's two superpowers: the United States and China. The U.S. insists China should allow the yuan to rise more quickly than it has, while China has warned that a major revaluation in currency would devastate its export-dependent economy, cause major unemployment and social upheaval.

Under pressure, China has recently allowed the yuan to rise a bit, and it hit a record high against the U.S. dollar on Thursday. But the pace is still much too slow for many in the U.S.

South Korea is a political ally of the West and hosts thousands of U.S. troops on its soil, yet it also has deep economic and social ties with China.

"We're not sure whether we have that much power to bridge the gap between two major players, but as chair, as the host country, we're just trying our best to encourage them to solve the problem," said Chan-Ho Ha, South Korea's ambassador to Canada, in an interview. "If we avoid this issue, then the legitimacy of G20 will be damaged because the whole world is watching very carefully."

This week, Japan's finance minister publicly questioned whether South Korea is able to guide talks on exchange rate policy, given its own recent actions to limit the rise of its currency.

"As the chair, South Korea and its role will be seriously questioned," Yoshihiko Noda told Japan's Parliament, a comment that drew objections from South Korea.

South Korea is among the countries - along with Brazil and China - that have limited the rise of their currencies in the past year, a general trend that has draw concern from the United States, the European Union and Canada.

On Thursday, the Bank of Korea left its borrowing rates unchanged in part because an appreciating won threatens export growth.

Bank Governor Kim Choong Soo said the issue of exchange rates "will and must be dealt with under the G-20 framework talks."

Next Friday's two-day gathering in Gyeonju is a precursor to the G20 leaders summit in Seoul in November. Meetings of the G20 were originally limited to finance ministers and central bankers, but grew to involve world leaders at the onset of the recession in 2008. The following year, the G20 declared itself to be the main platform for global decisions on economic policy, eclipsing the G7.

Combined, G20 nations account for 85 per cent of the world economy The fledgling forum is not without its critics, particularly from countries that did not make the cut. South Korea has heard many complaints from non-G20 nations who oppose the format, but Mr. Ha, the ambassador, says all the G20 can do is listen.

"If they open the door, lots of countries will just rush in," he said. "So they cannot open the door now. So the solution is, we call it, outreach activities - trying to accommodate their views or their complaints."

Mr. Ha said South Korea wants the G20 to focus on a new business-focused approach to developing emerging markets as a key part of the recovery.

"Some of the advanced economies have reached sort of a saturation point," he said. "To expand further, demand should come from developing countries."

With reports from Bloomberg and Reuters

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