Leaders of the G20 group of major economies have agreed to avoid "competitive devaluation" of currencies after a second day of difficult talks in the South Korea capital, Seoul, according to BBC.

Leaders agreed to come up with "indicative guidelines" to tackle trade imbalances afflicting world growth.

Tensions had been high between some delegations over how to correct distortions in currency and trade.

Some fear the conflict may threaten global growth.

The disagreement has primarily been between China and the United States.

US President Barack Obama said there should be no controversy about fixing imbalances "that helped to contribute to the crisis that we just went through".

Earlier a US official, speaking on condition of anonymity, said that China was acting to address Washington`s concerns about its currency.

"I think that if you look past some of the heat you`ve seen recently and you look at what`s happening in our very important relationship with China, I`m very encouraged by the progress we`ve seen," the official said.

Meanwhile, the UK, France, Germany, Italy and Spain issued a joint declaration to try to calm bond market jitters over a possible future EU bail-out fund.

As Irish bond yields reached a fresh high, leaders discussed the Irish Republic`s debt crisis amid concerns that the European Union will have to step in.

"Any new [bail-out] mechanism would only come into effect after mid-2013 with no impact whatsoever on the current arrangements," finance ministers from the five countries said in the declaration.

UK sources say that officials from the UK, France and Russia had to be called in the early hours of this morning after "fractious" negotiations between China and the US broke down in "acrimony".