* Document says United States must boost savings
* Says China must encourage stronger domestic demand
* Urges exchange rates to be in line with market fundamentals
By Timothy Heritage
BRUSSELS, Oct 22 (Reuters) - Leaders of the world's 20 biggest developing and developed economies must solve exchange rate tensions when they meet in November in Seoul, a European Commission document showed.
G20 leaders meet on Nov. 11-12 in Korea to try to put the world economy on a more stable footing and defuse currency tensions that economists say could trigger trade wars.
"We need a strong action plan coming out of Seoul," said the Commission document, obtained by Reuters, on the preparation for the G20 summit.
"It is key that there will be clear political commitment to deliver and to provide cooperative and lasting solutions to the current tensions in particular in currency markets," it said.
"Countries should also commit to avoid setting exchange rates at levels not in line with market fundamentals," it said.
While the G20 won praise for coordination of stimulus packages during the global financial crisis, its unity has been tested by low growth in rich countries and attempts by some emerging market economies to preserve export competitiveness by holding down their exchange rates.
Saudi Arabia, Germany and Russia are the G20 members with the biggest current account surpluses, but fellow member China is the chief culprit in the eyes of the United States and Europe because of massive currency market intervention to keep a lid on the yuan.
Beijing has amassed $2.65 trillion in official currency reserves as a consequence, and prompted the U.S. House of Representatives to pass a bill threatening retaliation unless China lets its currency off the leash to reduce its huge trade surplus with the United States.
"All major economies need to do their part to achieve economic rebalancing," the Commission document said.
It said that advanced deficit economies, which in G20 jargon means the United States, should increase their domestic savings rate while keeping open markets and raising export competitiveness.
It said emerging surplus economies -- a term used to describe China -- needed to encourage stronger domestic consumption through better social safety nets and financial markets, and allow greater flexibility of exchange rate regimes.
"We need to step up our efforts to address more systemic risks, limit the build-up of excessive reserves and as a result build a more stable and resilient international monetary system," the document said.
The 27-nation EU will be represented at the November summit by European Commission President Jose Manuel Barroso and by the President of the European Council Herman van Rompuy. (Writing by Jan Strupczewski; Editing by Alison Williams)