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An attempt by the Group of Seven nations to calm currency markets backfired in spectacular fashion Tuesday, as the club issued a rare statement on foreign exchange policies, only to see its members squabble over the declaration’s proper interpretation.

With financial markets obsessed by allegations that countries are deliberately seeking to devalue their currencies, the G7’s finance ministers and central banks reiterated their support for flexible exchange rates and disavowed the use of fiscal and monetary policy for anything besides meeting growth and inflation objectives.

“We will not target exchange rates,” said the statement, agreed by officials from the United States, Japan,...

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