Thousands of U.S. dollars notes are piling up
Stacks of U.S. dollars. Reuters

The Group of 20 (G20) leaders in Seoul could not thrash out any agreement on contentious forex and currency issues though talks ran through past midnight on Wednesday, said a spokesman at the summit media hall on Thursday morning.

The currency issue has become controversial in view of the US Fed decision to print $600 billion which may force an overflow of funds into the emerging and developing nations seeking higher yield.

The Fed's unilateral move came in the wake of China's refusal to budge on its currency valuation. US says China deliberately undervalued its currency but Beijing retorts the allegation saying even the Fed move was no better. Even Russia expressed its concern and said Washington should have consulted its peers before making such decision. Former Fed chief

The flip-flop on currency and failure to reach any agreement at the G20 summit even after the late-night talks is another indication that the emerging nations have no choice but to put in place their own control mechanisms before any flooding of dollars take place.

Mauricio Cardenas of the Brookings Institution aptly calls it tsunami of dollars which, emerging nations fear may create a bubble in the value of their assets.

Last week, Brazil and Thailand announced further hike in tax on bond holdings by foreigners and this week, Taiwan imposed limits on bond holdings by foreigners.

South Korea restricted derivatives holdings and Indonesia capped foreigners from selling bonds in short-term. Other countries like Israel and South Africa are stocking up more dollars to cushion any effect on their currrencies in future.

Other issues under discussion at the summit are bank capital and liquidity framework, and financial regulatory reforms.