The Group of Seven nations are considering issuing a statement this week reaffirming their commitment to "market-determined" exchange rates in response to heating rhetoric about a currency war, two G20 officials said on Monday.
The two officials, from different countries, told Reuters that if agreed, the statement could be released around the time G20 finance ministers and central bankers meet in Moscow on Friday and Saturday.
"It focuses on a commitment to market-determined exchange rates and (governments)not using policies to drive currencies," one official said.
The language could be subject to change but reads very similarly to the last statement issued by the G7 on currencies in 2011. Then, it affirmed support for market-determined exchange rates and pledged: "We will consult closely in regard to actions in exchange markets and will cooperate as appropriate."
Several countries have reacted with alarm to aggressively expansionary monetary policies urged by Japan's new government, which have prompted the yen to weaken sharply.
Last week, France went as far as calling for a medium-term target to be set for the euro. Berlin rejected that suggestion and said it did not view the currency as being overvalued as things stand.
European Central Bank chief Mario Draghi indulged in a bit of gentle verbal intervention last week, saying he would monitor the impact of a strengthening euro, which was enough to stop the currency in its tracks temporarily.
The Federal Reserve and Bank of Japan are expanding their balance sheets rapidly by printing money, while the ECB's balance sheet is tightening, partly due to banks paying back early cheap money the central bank doled out last year.
All else being equal, that could drive the euro yet higher as others explicitly or implicitly follow policies that will drive their currencies down - the last thing a struggling euro zone economy needs.
The EU's top monetary official, Olli Rehn, called at the weekend for "closer coordination"on currencies, noting the particular problems a strong euro would pose for southern, highly indebted members of the euro zone.
On the other hand, ECB policymaker Joerg Asmussen said France's problem was its internal competitiveness, not the euro.
The pain will be just as acute in emerging markets.
As newly minted cash pours into developing economies in search of higher yields,either their exchange rates will rise, making exports less competitive, or they will have to cut interest rates and/or intervene to hold down their currencies.That could fuel credit and asset price booms that sow the seeds of inflation.
Brazilian Finance Minister Guido Mantega, the man widely credited with coining the term currency war, told Reuters last week that it could get even worse if Europe joins the fray.
The issue will be discussed in Moscow but officials do not expect Japan to come under any serious pressure at this stage.