Careful calibration of a US dollar devaluation looks to be the only way to avert the sort of currency war flagged by Brazil and others, leaving G20 powers the unenviable task of agreeing some control of the process.
-- G20 needs framework for orderly dollar devaluation
-- Emerging forex revaluation hard to avoid given flows, US QE
The top world economies, shaken by three years of financial turmoil, are scrambling to cap or weaken their currencies in a fight over fragile global demand for exports - prompting retaliatory capital curbs and damaging trade rows.
As G20 finance chiefs prepare to meet on October 22, they are no closer to resolution of the decade-old bugbear of global imbalances between export-driven economies - mostly developing nations such as China, but also Japan and Germany - and the big global consumers, the United States, Britain and elsewhere.
While there have been loose agreements on re-balancing over time - where emerging powers allow currencies to rise gradually - the lack of an agreed blueprint to manage the transition is already prompting unilateral actions and tit-for-tat reactions in a febrile economic and political environment.
Faced with fiscal exhaustion, hostile electorates and booming China's refusal to allow a rapid rise of the yuan, the US, Japan and possibly Britain seem set on another bout of money printing to reboot their ailing economies and weaken their currencies.
Fast-growing developing countries with flexible exchange rates are caught in the crossfire and are reacting fast, leading to Brazil on Monday to double taxes on foreign inflows and South Korea on Tuesday to threaten curbs on currency trading. France, which takes G20's rotating chair next month, has denied weekend reports of "secret negotiations" with China. But it's clear that patience in the status quo is running out.
"To avoid the damaging consequences of continued unilateral action a core group of major economies needs to agree urgently on a multilateral and co-ordinated package of policy measures," Charles Dallara, director of banking group the Institute for International Finance, said on Monday.
US trade threats against China over the yuan showed the "counterproductive nature of unilateral policy," Dallara said in an open letter to the International Monetary Fund's annual meeting.
The main problem for emerging economies is much of the freshly minted "core" liquidity, chased away by depressed western interest rates, is flowing to higher overseas returns rather than strapped firms and households in America or Japan.
Their bind is a choice between standing back and accepting export-stunting currency surges and asset bubbles or to resume heavy intervention or capital controls that lead to inflation headaches or further trade distortions.
Robert Johnson, director of the Soros-funded Institute for New Economic Thinking, said G20 needs agreement on the size and pace of the currency shifts between three main groups - the United States and major consumers; the big exporters of China, Japan and Germany; and a grouping of emerging exporters.
What emerging economies lose on export competitiveness, he reckons, they can recapture at least partially in cheaper imports for their growing middle class of consumers.
The tricky bit is how to get everyone to move together and prevent market prices snowballing or governments overreacting.
Left to their own devices markets are unlikely to deliver the gradualism desired by most governments and faith in efficient pricing is at a low ebb after the credit crisis.
And, reading the runes well, money managers already see the opportunity and are stacking bets to exploit rising pressures.
Net flows to emerging market equities in the third quarter, at more than $30 billion, were some 50 percent up on the first six months of the year. And year-to-date inflows of almost $50 billion compare to a net exit from developed equity funds of almost $79 billion and an outflow of half a trillion from western cash funds. The speed and stability of these portfolio streams may be a legitimate concern, but longer-term flows play the same tune.