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* Minister says sterling decline a function of markets
* Britain to contribute to increase in IMF resources
By Adrian Croft
LONDON, March 6 (Reuters) - Britain on Friday rejected suggestions from continental Europe that it had let the value of sterling fall to improve its trade position.
Bank of Italy Governor Lorenzo Binin Smaghi took a thinly veiled swipe at London last month and French Economy Minister Christine Lagarde has said the Bank of England should take more steps to support sterling.
EU Internal Markets Commissioner Charlie McCreevy has also said some countries were very upset about sterling's fall.
"I can assure you that the decline of the pound sterling was not an engineered policy," Foreign Office Minister Mark Malloch-Brown told reporters, asked if the pound's sharp fall in recent months was a protectionist move.
"Its purpose was not to put us in a better trading position. It was a consequence of the judgement of markets on what was going on economically," said Malloch-Brown, who is also Prime Minister Gordon Brown's envoy for the G20 conference of advanced and developing nations to be held in London on April 2.
He said currencies had been behaving in a "fairly perverse way" due to the global financial crisis, saying the crisis had begun in the United States and yet the dollar had strengthened.
"Why? Because everybody's reaction to crisis is to want to have dollars. So I think it is the crisis which has driven the valuation of currencies, not government policies," he said.
The G20 conference is aimed at stabilising financial markets and putting the world economy on a path to recovery.
Britain is lobbying to increase the resources of international lending institutions to help countries combat the crisis and supports the International Monetary Fund's push to double its resources to $500 billion.
NEW FUNDS
IMF resources could be expanded through the issuance of special drawing rights (SDRs) or through governments or sovereign wealth funds lending money to the global lender, Malloch-Brown said. Japan has already injected $100 billion to bolster fund resources.
"Exactly what our contribution (to IMF resources) is depends on the final model agreed to ... One way or another, we clearly will be expecting to carry our part of the burden in any solution," Mallott-Brown said, adding China was a "natural candidate" to contribute.
"China's reserves are $2,000 billion. The increase we are talking about in IMF resources is some $250 billion from all sources ... so I think if something like the Japanese loan can be replicated by other countries, I would see China as being a very natural candidate to contribute to that -- and I think there's real interest and willingness."
He said he would also seek support from Saudi Arabia this weekend for an increase of IMF funds.
"I will go to Saudi Arabia tomorrow to try and explore just this -- what its view is of the way forward in terms of funding of additional IMF resources," he said. (Editing by Patrick Graham)