UPDATE: Lagarde: G7 View On Yuan To Allay Tension On Euro

WASHINGTON -(Dow Jones)- French Finance Minister Christine Lagarde Friday expressed confidence that the Group of Seven nations' forceful language on the Chinese yuan would help relieve some of the upward pressure on the European currency, despite the strong euro getting no direct mention in the G7's final communique. "The Chinese president has said during the Communist Party Congress that he wishes to increase the convertibility and the flexibility of the yuan," Lagarde said during a press conference after the G7 leading industrial nations released their statement. "This is good news. I am happy that in this G7 communique there is a specific paragraph about the yuan, calling for an accelerated appreciation of the effective exchange rate of the yuan against other currencies, and notably the euro." The G7 communique calls on China to allow "an accelerated appreciation of its effective exchange rate," in view of this country's "rising current account surplus and domestic inflation." French officials Friday said this marks a significant shift of language compared with previous G7 communiques. The last G7 statement, following its meeting in April, called for the yuan to actually "move" instead of just for greater flexibility. "The whole part on China in the statement is new," Xavier Musca, the head of the French treasury said. "It praises China's recent initiatives to let its currency rise against the dollar, but it also underlines new tensions in the country. This means Chinese authorities have to use all the tools at their disposal to unwind imbalances by letting the yuan appreciate against all currencies, not just the dollar." China is the only country to be singled out for its currency policy by the G7 communique, which doesn't mention the Japanese yen or the euro, despite the European currency trading close to record highs against the dollar. French President Nicolas Sarkozy has repeatedly bemoaned the strong euro, which he says is hurting French exports. France has tried to promote this view among other euro-zone countries, but with limited success. German Finance Minister Peer Steinbrueck recently says he favors a strong euro over a weak euro. Asked whether she would have liked the euro and the dollar to get a direct mention in the G7 statement, Lagarde said: "[U.S. Treasury Secretary] Henry Paulson and [Federal Reserve Chairman] Ben Bernanke made a reassuring assessment of the U.S economy, which is solid apart from the current weakness in the housing sector. They repeated that a strong dollar is in the interest of the U.S. I hope financial markets will recognize this, even if it hasn't been the case so far." The French finance minister also welcomed the G7 initiative to ask for more transparency on securitization transactions and on hedge funds in the wake of the liquidity crisis that roiled credit markets this summer, as well as the G7's call for better transparency and governance from sovereign wealth funds. "There is a growing consensus on these issues among G7 members," she said.